The cheapest Isas and pensions for regular investing

Investing a regular sum every month is a great way of growing a chunky pot over time without too much hassle. When you have decided what to invest in and set up a direct debit, you don't have to remember to make contributions - only to review your portfolio every few months. Automating your investments also means that you are not tempted to try to time the market, which is often fruitless and even damaging. And regular contributions help to smooth the effects of market volatility thanks to pound-cost averaging. 

Holly Mackay​, founder and chief executive of Boring Money, notes that the reduction of trading fees for regular investments has been a major trend among platforms over the past few years. With many providers, regular investing is cheaper than lump sum investing, and some offer it for free. The table below compares the main ones. “Given the volatility of markets in recent years, and the competitive fees on offer, this is a really sensible way for most of us to smooth our entry into markets and build our positions little and often,” says Mackay.

Without free regular investing, the trading costs of investing every month add up quickly, eating into the value of your investments. And if you only invest small monthly sums, even a small fee is a considerable drag. For example, if you invest £300 a month into two different securities and are charged £1.50 per deal, that’s 1 per cent of the value of your investments gone to fees.

Your costs are also affected by whether you invest in open-ended funds or listed securities – such as investment trusts, exchange-traded funds (ETFs) or directly held company stocks. And always check how regular investing works on the platform you are considering: Hargreaves, for example, makes all regular investments on the 10th of the month and you can’t change the date.

Regular investing in shares

Hargreaves Lansdown (HL.) made its regular investing service free earlier this year, having previously charged £1.50 per deal per month. It allows you to invest in funds, ready-made portfolios, FTSE 350 shares, investment trusts and ETFs, allocating a minimum of £25 a month per investment. The platform's annual fee for holding listed equities is also good value for money, as this is free for general investment accounts and 0.45 per cent of the value of the investments, capped at £45 a year, within individual savings accounts (Isas). 

However, Hargreaves is a pricey platform on which to hold funds, even though fund dealing is free. One-off purchases of direct shareholdings, investment trusts and ETFs are also quite punishing at up to £11.95 per deal, but regular investing in these is relatively cheaper, allowing you to benefit from a competitive price.

Freetrade launched free regular investing for listed equities – “recurring orders” – earlier this year. This is not available with the platform’s free basic plan. But you can access it with its standard plan, which costs £59.88 a year, and offers a wider choice of shares to invest in and the option of doing so within an Isa. If you only want regular investing, this is not as good a deal as Hargreaves Lansdown offers, but is more competitive if you want to trade as much as you like for free.

Freetrade takes the money for recurring order charges from your Freetrade account rather than directly from your bank account, so you need to set up a separate standing order.

Trading 212, meanwhile, is a cheap option for both regular investing and one-off trades. You can create a basket of securities on its app and make automatic regular investments for free. Trading and holding securities, including within an Isa, are also free, although there is a 0.7 per cent fee on card deposits above £2,000.

Freetrade and Trading 212 do not offer open-ended funds.

Regular investing in funds

Regular investing in open-ended funds is cheaper because some platforms, such as Hargreaves Lansdown, Bestinvest, Charles Stanley and Fidelity, do not charge for funds dealing. However, they do tend to charge higher annual fees for holding funds so consider whether you really need to trade that often.

If you like to hold a mixture of funds and listed securities such as ETFs, investment trusts and shares, Halifax is a competitive option. It offers free regular investing for both types of security, and a fixed annual fee of £36 for Isas and general investment accounts. But its £9.50 dealing fee is fairly pricey and applies to both funds and shares.

Interactive Investor offers free regular investing for both open-ended funds and listed securities with all its plans, including the Investor Essentials plan for portfolios worth up to £50,000, which costs £59.88 a year. With its fixed fee of £143.88 a year for its standard Investor plan, the platform becomes proportionally cheaper as your pot grows, so it’s an excellent place to park a chunky portfolio of funds. However, it charges a £3.99 dealing fee for one-off trades of both funds and shares.

Vanguard is a cheap option for investing in funds if you have a small portfolio. Its annual fee stands at 0.15 per cent a year capped at £375, there is no fee for buying and selling funds and you can set up regular investing for free. But it only offers its own funds and ETFs, the majority of which are passively managed. 

If you want both free regular investing and funds dealing, you have to pay more in annual fees. Fidelity is not bad with a 0.35 per cent fee on holdings worth up to £250,000, but you pay £90 a year if you have less than £25,000 on the platform without a regular savings plan.