The Times - UK - 04.12.2021

the times | Saturday December 4 2021 61

Money

Anxious lockdown cat? It’s going to cost you Page 63

S

hares wobbled last week as news of the Omicron variant broke and the threat of inflation stalked leading economies. The Bank of England has said that inflation could hit 5 per cent by spring. If you paid 1 per cent for your investment platform fee and another 1 per cent on trading charges, the return you would need to not lose money in real terms would be at least 7 per cent. As you cannot guarantee returns, one thing you can do is bring your charges down — and the price war that is hotting up between investment platforms will help. AJ Bell, Britain’s third largest DIY investment platform, is to launch a bar- gain app-based platform next year called Dodl that will have a fee of 0.15 per cent a year with no trading charges. This undercuts AJ Bell’s Youin- vest platform, which costs up to 0.25 per cent, and will match the US tracker fund specialist Vanguard, which also charges 0.15 per cent a year. A £10,000 cash Isa on Dodl will cost just £15 a year. The growing number of cheap, app- based services is putting pressure on more traditional investment platforms such as Hargreaves Lansdown, whose fees are looking increasingly expensive. Having £50,000 invested in funds with Hargreaves Lansdown, which has an annual fee of 0.45 per cent, would cost £150 a year more than with Dodl. If you had £100,000 saved it would cost £300 more. Those switching £100,000 from Har- greaves Lansdown to Freetrade, one of the fastest growing alternative platforms with about 600,000 customers, could save more than £400 a year, according to the analyst Boring Money.

0 So which platform is best? As a general rule, it is best to keep trading to a minimum and opt for a platform with low charges. Dodl and Vanguard have no trading fees on top of their 0.15 per cent a year charges. AJ Bell’s Youinvest charges up to £1.50 for online fund trades and £9.95 for shares. If you have less than £10,000, Vanguard becomes cheaper because Dodl has a minimum £1 a month charge. Those with £1,000 in funds would pay £1.50 a year in platform fees to Vanguard, £12 to Dodl and £10 to Youinvest. The main downside to Dodl is its limited options. Investors will initially have access to 50 well-known UK listed shares, such as Lloyds and Tesco, as well as 30 tracker funds, which replicate the holdings of an index or sector and are managed by algorithms.

0 Go for fixed fees if you have more than £30,000 Most firms tend to charge a percentage fee, so the bigger your pot the more expensive it gets. Interactive Investor charges £9.99 a month for an Isa. Firms that do not charge a platform fee for a basic service, such as Freetrade, are the cheapest overall, but you will have a limited number of investment options compared with larger rivals. A £100,000 portfolio would cost nothing with Freetrade unless you had an Isa, in which case it would cost £3 a month. Iweb also has no platform fees, but has a £25 one-off opening fee for an Isa and charges £5 per trade. The benefit of Iweb is that it is cheap and it has a wide choice of investments, but the downside is that its website is pretty basic at the moment.

0 Get the family investing Interactive Investor, the second largest platform, has a new discount that lets customers invite friends and family to join the service at no cost. If an investor invited their spouse and two adult children the family would save £300. Customers are normally charged £9.99 a month for a trading or Isa account. However, since last month an existing customer can pay an additional £60 a year to invite up to five other people to start an account with no platform charge, as long as they have less than £30,000 invested. After this they are charged as normal. Interactive Investor already allows you to open a free Junior Isa account, meaning children can invest without any platform charge. Hargreaves Lansdown and AJ Bell charge for Junior Isas separate- ly. Fidelity, another DIY platform, offers savings to families who connect

Get set for

a price war

over your

investments

Fund platforms are lowering their charges to

win our custom. Ali Hussain compares costs

Annual platform charges

Invested in funds £1,000 £10,000 £50,000 £100,000

AJ Bell Youinvest £10 £32.50 £132.50 £257.50

AJ Bell Dodl £12 £15 £75 £150 Freetrade* £36 £36 £36 £36 Hargreaves Lansdown £4.50 £45 £225 £450

Interactive Investor £119.88 £119.88 £119.88 £119.88 Vanguard £1.50 £15 £75 £150 *ETFs Note: Assumes five trades a year Source: Boring Money

accounts. It charges 0.35 per cent on the first £250,000, then 0.2 per cent up to £1 million. Everyone in a household in which one person has invested at least £250,000 can benefit from the reduced 0.2 per cent fee, even if others have less than this saved. They must live at the same address to benefit. AJ Bell and Hargreaves Lansdown do not offer these reductions.

0 How to switch If you transfer without cashing in first you may be charged a fee. AJ Bell charges £9.95 per transfer of a share or fund. You should contact the firm to which you wish to transfer and it will start the process. Cash transfers should take a couple of weeks, transfers of shares four to six weeks and funds six to eight weeks.You may face delays if you are invested in a version of a fund that is not available on another platform.

Nationwide

branches

that shut

on Fridays

N

ationwide building society is shutting dozens of branches for one extra day a week and turn- ing them into call centres. Some 50 branches — 8 per cent of the bank’s network — have closed perma- nently for one day a week since July because too few customers come in to make it worth staying open. On the day the branch is closed staff still come in but are redeployed to other duties, in- cluding working on the phones or re- sponding to internet chat messages. This happens at the branches in Swadlincote, a former mining town in Derbyshire, which is closed every Thursday, and Hungerford, in Berk- shire, which is closed on Fridays. Nationwide said the day that each branch shuts varies depending on when they are least busy. The closure policy was outlined by Andrew Westhead, Nationwide’s regional director for the east of En- gland, at a conference in London this week. The next day TSB said it would close 70 branches, almost a quarter of

its network, next year with the potent- ial loss of 150 jobs. There will be 220 TSB branches by the end of next year compared with 536 two years ago. Westhead said that by keeping branches open some of the time the bank was keeping its pledge not to complete- ly close any of its 627 branches until at least January 2023. “In some of our quieter community branches, when our members need us and when we are busy, we will be open traditionally,” he said. “And at our quieter times, we will ac- tually close, and those colleagues have been multiskilled to help members from across the UK, whether by telephone calls or through chat or a variety of things. We have an awful lot of expe- rience within our branch network.” Nationwide said that the closures came after “a significant increase in our members choosing to use telephone banking, virtual appointments, digital messages, online and mobile app services” during the pandemic. Until the changes, six out of ten Nationwide branches were open six days a week, in- cluding a half-day on Saturday, and the rest were open from Monday to Friday. More than 4,300 bank branches have shut across the UK since the start of 2015, nearly two a day, according to the consumer group Which?. Nationwide, which is based in Swin- don, said last month that its profits had more than doubled to £853 million in the past six months, driven by higher lending margins during the pandemic. It is the country’s second biggest mort- gage lender, after Lloyds. David Byers

4,300 UK bank branches have been axed since the start of 2015

P

aul Gill, 61, from Canterbury, is beating inflation by drawing a tax-free retirement income of over £20,000 a year (Ali Hussain writes). He chose not to

take the 25 per cent tax-free lump sum from his self-invested personal pension (Sipp) when he was made redundant four years ago. He can now take up to £16,760 a year from his Sipp tax-free — 25 per cent of this (£4,190) is the tax- free amount he is allowed because he did not take his lump sum and £12,570 is the annual personal allowance you can earn without paying tax. Gill, who is too

young to claim a state pension, supplements this with withdrawals from his Isas. Last year he moved his pension and Isas from Hargreaves Lansdown to Interactive Investor after working out that he could save £1,800 a year by paying the £19.99 monthly fee instead of Hargreaves’ percentage fee. He has a spreadsheet to work out the charges. “It is time-consuming and complex, but it is definitely worth it.”

‘My £20k

tax-free

pension

income’

Paul Gill with his son, Henry

The Times - UK - 04.12.2021

Get our desktop app

Company

Features

Documentation

Resources