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Buy the most cost-effective Isa

Make sure you invest via the most cost effective Isa for your requirements with our top tips

If you don't already have an individual saving account (Isa), you may be thinking about setting one up to reap the returns of these tax-efficient wrappers, but choosing between the huge number of Isa providers can be difficult.

Platforms are the obvious choice. These allow you to manage your investments directly online, and hold shares and funds together in the same place, making keeping track of your investments straightforward. Platforms also often allow you to buy a range of investment funds more cheaply than if you bought them direct from the asset manager that runs them.

When choosing a platform for your Isa there are several factors you need to weigh up, including charges, customer service, the range of funds available and how easy their website is to use. Costs have a direct impact on the performance of your investments, so it pays to check these closely. But working out which Isa provider will be the cheapest for your circumstances can be complicated as they don't all charge in the same way. There are four main fees to look out for.

 

1. Administration fees

The majority of platforms charge administration fees when you open an Isa, although TD Direct Investing is a notable exception. This administration fee can be referred to as a custody, account management or platform fee. It will either be a percentage of the value of your account holdings or a flat fee irrespective of your portfolio's size.

Generally, flat fees are better for larger pots and percentage-based fees for smaller ones. If your portfolio is worth more than £100,000 you should probably opt for a flat fee provider as this caps the amount you will be charged. Examples include: Halifax Share Dealing, which charges a flat administration fee of £12.50 per year, The Share Centre, which charges £4 + VAT per month, and Interactive Investor which charges a quarterly fee of £20.

Some examples of percentage-charging providers include Axa Self Investor, which charges 0.35 per cent on assets under £250,000 and 0.2 per cent on portfolios worth more than this amount. Bestinvest.co.uk, meanwhile, charges 0.4 per cent of the value of the assets held between £0 and £250,000, 0.2 per cent between £250,000 and £1m, and for those with a value above £1m there is no charge.

The amount you pay in platform fees might also vary depending on whether you hold funds, shares or a combination of the two.

For example, AJ Bell Youinvest charges 0.25 per cent on shares in your portfolio, up to a maximum of £7.50 per quarter. For funds, the platform charges 0.25 per cent on those with a value of up to £250,000, 0.1 per cent for those with a value of between £250,000 and £1m, 0.05 per cent for those with a value between £1m and £2m, and no charge for those with a value above £2m.

Hargreaves Lansdown charges 0.45 per cent on Isa share portfolios, capped at £45 a year. On funds it charges 0.45 per cent a year on the first £250,000 of funds, 0.25 per cent on funds worth between £250,000 and £1m, 0.1 per cent between £1m and £2m, and for funds worth over £2m there is no charge.

 

Annual administration charges for an Isa holding only funds

ProviderPortfolio size
£20k£50k£100k£250k
Alliance Trust Savings £120£120£120£120
AJ Bell Youinvest £50£125£250£625
AXA Self Investor£70£175£350£875
Barclays Stockbrokers £70£175£350£875
Tilney Bestinvest£80£200£400£1,000
Charles Stanley Direct£50£125£250£625
Fidelity Personal Investing £70£175£350£875
Interactive Investor £80£80£80£80
Halifax Share Dealing £12.50£12.50£12.50£12.50
Hargreaves Lansdown £90£225£450£1,125
iWebOnly charge is £25 account opening fee
TD Direct £70£175£350£875
The Share Centre £48£48£48£48
Trustnet Direct £50£125£200£200

Annual charges for an Isa holding only individual shares

ProviderPortfolio size
£20k£50k£100k£250k
Alliance Trust Savings £120£120£120£120
AJ Bell Youinvest £30£30£30£30
Barclays Stockbrokers £30£30£30£30
Tilney Bestinvest£80£200£400£1,000
Charles Stanley Direct£50£125£240£240
Fidelity Personal Investing nananana
Interactive Investor £80£80£80£80
Halifax Share Dealing £12.50£12.50£12.50£12.50
Hargreaves Lansdown £45£45£45£45
iWebOnly charge is £25 account opening fee
TD Direct NoneNoneNoneNone
The Share Centre £48£48£48£48
Trustnet Direct £50£125£200£200

Source: Investors Chronicle and platform websites, excluding VAT

 

2. Fund fees

If you buy investment funds for your Isa, this will incur additional charges from the asset manager that runs them, on top of your platform fees. Typically, this fee will be between 0.1 and 1.5 per cent. Some platforms negotiate lower ongoing fund charges than you would get buying directly from the manager or on other platforms. So if you want to hold a particular fund in your Isa, it may be worth checking their charges on different platforms to see if any are noticeably cheaper.

For example, Hargreaves Lansdown has secured the lowest ongoing charge for investing in Neil Woodford's new Woodford Income Focus Fund, at 0.6 per cent.

 

3. Dealing fees

You also need to look at how much a platform will charge you to buy and sell stocks and funds. The cost of trading can add up quickly, with platforms typically charging £10 or more per transaction. If you plan to trade a lot then you should probably pick a provider that offers cheaper dealing fees or frequent trading plans. For example, IWeb charges £5 per trade on stocks and funds, and Bestinvest.co.uk charges £7.50 to trade stocks while fund trades are free.

Several other platforms also enable you to buy and sell funds for free. These include:

■ AXA Self Investor

Barclays Stockbrokers

Charles Stanley Direct

Fidelity Personal Investing

■ Hargreaves Lansdown

■ TD Direct Investing

 

You can also reduce dealing fees by setting up a monthly direct debit with your platform. This allows you to make monthly contributions into your funds from as little as £20 a month. Regular investing has the added benefit of smoothing out market volatility, as when prices are high you will buy fewer shares or units, and when prices are low you will buy more with your fixed amount.

Many platforms, including AJ Bell, Alliance Trust Savings, Hargreaves Lansdown, Interactive Investor and Selftrade, offer regular investing from £1.50 per trade. But some of these schemes only apply to buying investments, so if you want to sell you will be charged the usual trading fee.

  

4. Transfer fees

When it comes to moving your Isa between platforms some providers charge chunky fees and it can be a laborious process. The transfer fee is usually charged per fund, so the more funds you have within your stocks-and-shares Isa, the more it will cost you to leave.

Generally, you can expect to pay £15 to £25 per holding to switch to a different provider. However, there are some cheaper deals around. For example, The Share Centre charges £25 per account to transfer out, and a few providers do not charge any transfer exit fees to move funds. These include AXA Self Investor, Fidelity Personal Investing and TD Direct Investing.

Once you've picked the provider you want to buy your stocks and shares Isa from, the next thing to do is decide what investments to put into it, so check out our 2017 Isa Guide for suggestions on investment trusts, funds, passive funds and shares.

 

Isa platform providers' fees compared

PlatformStandard online dealing costs for UK shares (per trade)Standard online dealing costs for funds (per trade)Isa annual admin charges Transfer out fee
Alliance Trust Savings £9.99£9.99£120£100 plus VAT
AJ Bell Youinvest £9.95£1.50Shares: 0.25% (maximum £7.50 per quarter), Funds: first £0 - 250k: 0.25%, Next £250k - £1m: 0.10%, Next £1m - £2m: 0.05%, over £2m: no charge £25 per holding
AXA Self InvestornaFree0.35% <£250k, 0.2% > £250k.Free
Barclays Stockbrokers £11.95FreeFunds: 0.35%. Shares: £30 admin fee (no admin fee if funds only) Free
Bestinvest.co.uk£7.50 Free0.4% £0-£250k, 0.2% £250k-£1m, >£1m, no charge £25 per asset transferred
Charles Stanley Direct£11.50FreeShares: 0.25% (minimum of £24, maximum of £2400). Funds: £0-£250k 0.25%, £250k-500k 0.2%, £500k-£1m 0.15%, £1m-£2m 0.05%, over £2m no charge.Funds£10 per holding
Fidelity Personal Investing naFree£45 0-£7.5k, 0.35% £7.5k-£250k, 0.2% £250k-£1m; capped at £45 if holding investment trusts or ETFsFree
Interactive Investor £10£10£80£0 for <£10 lines of stock for new customers (under one year) £15 per line of stock afterwards
Halifax Share Dealing £12.50£12.50£12.50£25 per investment (maximum £125)
Hargreaves Lansdown 0-9: £11.95, 10-19: £8.95, >20: £5.95FreeFunds: 0.45% £0-£250k, 0.25% £250k-£1m, 0.1%, over £2m no charge (amount up to £250k charged at 0.45% and over at 0.25%). Stocks and shares: 0.45% max £45£25 per holding
iWeb£5£5One-off account opening fee of £25 £25 per stock, maximum £125
TD Direct Investing  £5.95 for first three months, standard rate £12.50, FreeAccount admin fee: £30 + VAT per year for balances under £5,100. Free for balances over £5,100. Funds: 0.30%: £0-£250k, 0.2%: over £250k, max fee of £750 per account per charge (max total charge of £1500 per account per year).Free
The Share Centre 1%, min £7.50 1%, min £7.50£48£25 per account
Trustnet Direct £10£100.25% capped at £200 pa£15 per line of stock

Source: Investors Chronicle and platform websites, excluding VAT, *Funds-only plans