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Cheapest FTSE tracker ISA?

Investment | Trackers Helpful? 10

Asked by baxter, submitted 04 March 2012.

Open Quote First off I'd like to say this site seems brilliant, as one of I am sure many people entering in to the investment side of saving, your well laid out and clear 'jargon free' site is great thank you.

I planned to ask a few questions but pretty much found the answers on your site. This leaves me really with only one question which is related to your views on Hargreaves fund platform for Vanguard, I wounder if your views had changed since your entry (Dec 11), especially as they have now increased the charges placed to investments through them.

My plan to date is to invest the 2012-13 full ISA allowance into the Vanguard FTSE All Share Tracker through Alliance Trust, due to their low costs. Your views would be welcomed.

Thank you for your time, and once again for this site.
End Quote

Answered by Justin on 01 August 2012

Really glad you like the site, thank you for the kind words. Sorry it's taken me a while to answer.

Hargreaves Lansdown (HL) Vantage enjoys a good reputation for customer service and pumps out lots of research/information/marketing material (on which there are mixed views). As a result, they seem to have plenty of satisfied customers.

But times are changing and HL's Vantage platform charges are generally less competitive than they once were, especially since the recent introduction of the £1 or £2 monthly charge per fund that doesn't pay any trail commission, as you refer to. Trail commission rebates that average around 0.15% for a typical portfolio (zero for SIPPs) are starting to look rather stingy too, so it's not hard to see why some previously happy clients are taking their business elsewhere.

Alliance Trust Savings and Interactive Investor currently seem to offer the best deals for investors with reasonable sized portfolios (about £60,000+) of trail commission paying funds, thanks to full trail commission and platform fee rebates. But, their fixed annual fees can prove expensive for smaller portfolios, especially when there's no trail commission to rebate. Cavendish Online invariably comes up trumps for trail commission paying portfolios below this amount, but doesn't offer Vanguard funds.

So what's your cheapest route to buying a FTSE All Share tracker fund within an ISA? Assuming a £10,680 investment with no existing portfolio:

Cavendish Online - HSBC FTSE All Share Tracker 0.27% TER no extra charges.

Hargreaves Lansdown - SWIP foundation Growth 0.11% TER, plus £24 annual fee, equivalent total annual cost 0.33%.

Sippdeal - db X-trackers FTSE All Share ETF TER 0.4%, plus £9.95 dealing fee, equivalent total annual cost first year 0.49% then 0.4%.

Alliance Trust Savings - Vanguard FTSE Equity Index 0.15% TER, plus £12.50 dealing fee and £48 annual ISA fee, equivalent total annual cost first year 0.71% then 0.6%..

Interactive Investor - Fidelity Moneybuilder UK Index TER 0.3% plus £80 annual ISA fee, equivalent total annual cost 1.05%.

Of course, the relative competitiveness of these companies will change if you decide to hold trail commission paying funds in future, as mentioned earlier. But this hopefully gives you a helpful indication for a sole tracker fund investment.

Please note this answer does not constitute a recommendation or financial advice and should not be relied upon when making specific investment or other financial decisions. You should always undertake your own research into whether a product or service is appropriate for your needs and, if necessary, use a qualified professional adviser.

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