This article is part of our Guide to Maximising Your Pension, helping investors build up the maximum possible pension pot – and turn it into the maximum possible retirement income.
ISA investors could save up to £230 a year by switching to a cheaper online platform, a new analysis from a finance consultancy found.
Investors might not realise how varied the cost of selling and buying investments is when investing their ISA allowance; thanks to lack of transparency on providers’ pricing and a lack of time to compare prices before investing in a fund platform.
Historically investors have always left their ISA investing decision to the last minute; evidence provided by Fidelity International revealed that the most popular day for ISA investing for the tax year in 2015 and 2014 was March 30 and April 2 – and time is running out to use this year’s £15,240 allowance. With less than 48 hours to go, investors might risk using a more expensive fund platform accidentally in a rush.
The report from Moneycomms, a personal finance research platform compared 21 leading fund online platforms in the UK based on a £30,000 investment –
They found that investors could save an average of £55.54 a year by switching to the cheapest platform in between the leading fund platforms.
Within the 21 fund platforms shown in the report, The Share Centre was the most expensive provider, costing up to £517.50, while the cheapest option was Cavendish with a £287.25 cost. If investors switched from the former to the latter, they could save up to £230.25 a year.
Andrew Hagger, founder of Moneycomms commented that while it was reasonable to have various levels of charges as fund platforms had different target audiences, not all of the platforms were clear about their charges.
“There is no doubt that opacity plays a role,” Hagger said, “As well as offering a competitive charging tariff it is also key that a provider’s pricing is easy to find and understand.”
Trend of Fund Platforms in ISA and Pension Investing
Thanks to the internet investors can now trade any types of their investment conveniently through online platforms, named fund platforms, also called fund supermarkets. These fund platforms enable investors to move assets between platforms. They still charge an administration fee but with a fairly lower price compared to the past.
Fund platforms have become increasingly popular with a large amount of trading volumes, especially in personal pension and ISA investment shopping. Figures from the Investment Association showed that net sales of the five fund platforms, Cofunds, Fidelity, Hargreaves Lansdown, Old Mutual Wealth and Transact, in February 2016 were £468 million.
The data was also divided into four product groups, in which personal pensions had the highest net sales at £502 million in February 2016, followed by ISAs at £17 million. However unwrapped and insurance bonds products had an outflow of £22 million, and £29 million, respectively.
Back to 2015, net sales of these five fund platforms together made up more than £12.7 billion, showing the popularity of these fund platforms among investors. Net sales of personal pension in 2015 were more than £5.5 billion and net sales of ISAs were more than £3.5 billion, together making up a majority of the net sales in 2015.
Yet while these online platforms are easy and less time-consuming than approaching individual fund providers, investors should still give themselves time to compare different charges of fund platforms.
Maike Currie, investment director for Personal Investing at Fidelity International advised investors to make the most of the ISA allowance early in the tax year, “If you invest at the beginning of the tax year, you give your money an additional 12 months of tax-efficient growth. The longer your investments are kept in the market, the greater the impact of compounding – that ‘snowball’ effect of building new investment returns on the investment returns you’ve already achieved.”
