Vanguard hikes Isa and pension fees for small portfolios

Vanguard will introduce a minimum account fee on its DIY investor platform, resulting in a fee hike for those with small portfolios. 

The platform will continue to charge an annual 0.15 per cent fee across all assets and accounts, capped at £375 a year, but with a minimum charge of £4 a month. This will come into force on 31 January 2025.

This will result in anyone with a portfolio worth less than £32,000 on the platform paying more than they do now. Someone with £20,000 will go from being charged an annual fee of £30 to £48.

Ben Summers, head of personal investor services UK at Vanguard, said the change was necessary "to help us cover the rising cost of serving our clients” and will enable the platform to “continue investing in new features, products and services”.

Holly Mackay, CEO of Boring Money, noted that as of the third quarter of 2024, Vanguard’s customers had an average of £38,100 with the platform, so the move “will impact a significant proportion of their customers, who are typically younger and have slightly lower balances than the average”.

She argued Vanguard’s key selling point was always about "cost, not service”. “This has a subtle impact. It removes them from being an option where no one needed to worry about cost, to an option where people need to do the maths,” she added. However, she said that £48 a year for a decent investment service was still not a terrible outcome for investors. "It’s just not the no-brainer it once was.”

AJ Bell charges 0.25 per cent a month for its Isa. This can work out cheaper than Vanguard for small portfolios, although it will depend on how much an investor holds and how often they trade.

Additionally, Vanguard only offers its funds and ETFs on the platforms, so investors have much more limited choice. From January, Vanguard will also reduce fees on its managed Isa, a product where the platform picks the investor’s holdings based on their attitude to risk. The management fee will be cut from 0.3 per cent to 0.2 per cent. For those who only have a managed Isa or a managed pension, the minimum monthly fee will not apply.