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Savers could claw back thousands of pounds in fees by making a simple change to their Isa, according to new analysis.
For those investing £50,000 or more in funds in a stocks and shares Isa, Hargreaves Lansdown ranks as the priciest provider across the board, research by the Lang Cat, an analyst, found.
Isa millionaires invested in funds would pay £3,000 a year in fees to Britain’s largest platform, compared to the lowest-priced provider, iWeb, which charges just £60.
Making the switch would save a £1m investor £2,940 in fees a year.
When saving for the future, these small margins can make all the difference. Due to compounding returns, the effects of losing out on small amounts here and there can be massively amplified over the course of several decades.
If you paid annual fees of £3,000 for 20 years instead of investing that money, assuming an average annual return of 6pc, you would lose out on a total of £110,357 over the two decades. This highlights how important it is to minimise the fees you pay in a stocks and shares Isa.
Choose a provider depending on your portfolio size
Fees can be charged in several ways – you might pay a set percentage of your overall portfolio size, or a flat amount. If you have a larger portfolio, you will likely want to consider a provider that charges flat fees, rather than percentage-based.
Equally, if you have smaller holdings, a provider that charges flat fees can eat through a higher percentage of your savings. However, some providers prove comparatively expensive no matter the size of your portfolio.
A standard fee charged by stocks and shares Isa providers is a “platform fee”, which you essentially pay them to look after your money. This might be a flat fee no matter the size of your portfolio, or tiered depending on how much you have invested.
On top of a platform fee, you’ll usually have to pay fees when dealing shares or funds, but these might vary depending on which type of investment you are making.
Figures from the Lang Cat show that the cheapest Isa deals for those with a smaller portfolio of £5,000 come from Barclays and Close Brothers, both of which charge £13, equal to 0.25pc.
This is what you could expect to pay annually, assuming investment solely in open-ended funds, making 12 trades over the course of a year.
Barclays charges 0.25pc across portfolios up to £200,000, and Close Brothers AM Self Directed Service charges this fee for portfolios up to £500,000.
As is usually the case with percentage-based fees, these providers are cheaper for smaller portfolios because you’re paying a small percentage of a small sum.