Vanguard, long known for its low-cost investment options, has recently announced a significant change to its fee structure. Starting January 31, 2025, Vanguard will implement a £4 minimum monthly account fee for portfolios under £32,000. While the move aims to balance their operational costs, it has left many smaller investors re-evaluating their options.
In this guide, I’ll share how Vanguard’s new fees impacted my investment journey, what alternatives I explored, and why I ultimately switched to InvestEngine—a platform offering a fee-free structure.
Vanguard’s New Fee Structure Explained
Under the new structure, investors with portfolios below £32,000 will pay a minimum monthly account fee of £4, equivalent to £48 annually. Here are the key details:
Who is exempt?
- Junior ISAs: These remain fee-free.
- Managed ISAs and Managed Pensions: These accounts are exempt as their management fees cover operational costs.
For portfolios above £32,000:
- The 0.15% annual account fee remains unchanged, capped at £375 annually.
While this structure may benefit investors with larger portfolios, these added costs could erode the returns of smaller investors.
My Journey: From Vanguard to InvestEngine
When I first started investing, Vanguard’s low-cost model seemed ideal. However, the new fees pushed me to explore alternatives. Here’s how my journey unfolded:
1. Initial Decision to Switch to Dodl by AJ Bell
Dodl stood out as a low-cost, beginner-friendly platform:
- Annual Fee: Just 0.15%, amounting to £18 for a £12,000 portfolio—a significant saving compared to Vanguard’s £48.
- Flexibility: Offers diversified investment options, though less extensive than Hargreaves Lansdown.
2. Why I Ultimately Chose InvestEngine
Before finalising my switch to Dodl, I discovered InvestEngine, a platform that aligned better with my goals:
- Zero Platform Fees: No charges for General Investment Accounts or ISAs, maximizing my returns.
- Pension Transfers: Recently introduced the ability to transfer pensions from Vanguard.
- AutoInvest Feature: Automates portfolio management, ensuring diversification without added costs.
By moving to InvestEngine, I avoided unnecessary fees and kept my investments aligned with my long-term goals.
Affiliate Disclosure
This post contains an affiliate link to InvestEngine. I personally use InvestEngine and have found it to be a great tool for managing my investments. If you sign up through my link, you can get between £20 and £100 for an ISA or General account, or up to £200 for a Business account.
I’ll also receive a reward for referring you. This helps support my work and allows me to continue sharing helpful content. Thank you for your support!
If you’re considering a switch, I recommend checking out InvestEngine for its fee-free structure and great features.
Platform Comparison: Vanguard vs. Alternatives
Here’s a quick comparison of costs for a £12,000 portfolio:
| Platform | Annual Fee | Key Pros | Key Cons |
|---|---|---|---|
| Vanguard | £48 | Trusted brand, simple platform | Limited to Vanguard-only funds |
| Dodl by AJ Bell | £18 | Low fees, easy to use | Limited advanced tools |
| InvestEngine | £0 | Fee-free, AutoInvest feature | Fewer individual stock options |
| Trading 212 | £0 | Commission-free trading | No pension accounts yet |
| Hargreaves Lansdown | £54 | Wide range of investments, robust tools | High fees for smaller portfolios |
Why Minimising Fees Matters
Even small fees can significantly impact your portfolio over time due to compounding. For example:
- Over 10 years, paying £48 annually could reduce your portfolio’s growth by hundreds of pounds compared to a fee-free option like InvestEngine.
By reducing fees, you allow more of your money to stay invested, maximising long-term returns.
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Tips for Choosing the Right Investment Platform
Here’s what I recommend when evaluating platforms:
- Define Your Goals: Are you focused on growing a small portfolio, saving for retirement, or diversifying investments?
- Compare Costs: Look for platforms like InvestEngine or Trading 212 to minimize fees.
- Evaluate Features: Consider tools like automated investing, fund variety, and user experience.
- Stay Flexible: Don’t hesitate to switch platforms if your needs evolve.
Why I Recommend InvestEngine
Disclosure: This post contains affiliate links. I only recommend products and services I personally use or believe will add value to my readers. Thank you for supporting my work!
For smaller investors, InvestEngine offers unmatched value with its fee-free structure, automated tools, and support for pension transfers. Switching to InvestEngine was a game-changer for me, and I believe it could be for you too.
Final Thoughts
Switching platforms can feel daunting, but it’s an essential step in optimising your investments. Whether you’re starting small or managing a significant portfolio, the right platform can help you save on fees and achieve your financial goals.
If you’ve been impacted by Vanguard’s new fees, consider exploring alternatives like InvestEngine or Dodl. Remember: the best time to invest was yesterday. The second-best time is today.
What do you think about Vanguard’s fee changes? Are you planning to switch platforms? Let me know in the comments below!
Next Steps for Your Investment Journey
If you’re still unsure where to begin, explore some of my other blogs to gain a deeper understanding:
Further Reading: A Deep Dive into Vanguard’s New Fees
For a more detailed analysis of Vanguard’s fee changes and how they compare to other platforms, I recommend this insightful article by Money to the Masses.
Their review breaks down the fee structure, its impact on investors, and compares Vanguard with other platforms like InvestEngine and AJ Bell Dodl.
Tax-Efficient Investing: Why ISAs Matter
Managed ISAs and SIPPs already include management fees, which cover the costs of professional oversight. This exemption ensures they remain competitive for investors seeking hands-off, professionally managed investment options.
Platforms like Vanguard, Dodl, and InvestEngine support Stocks and Shares ISAs, allowing tax-free growth on investments. With an ISA, you avoid paying income tax, dividend tax, or capital gains tax—making it an essential tool for long-term wealth building.
FAQ
What are Vanguard's new fees?
Starting January 31, 2025, Vanguard will introduce a £4 minimum monthly account fee for portfolios below £32,000, which totals £48 annually. This fee is waived for Junior ISAs and accounts holding only Managed ISAs or Managed Pensions. For portfolios above £32,000, the existing 0.15% annual fee (capped at £375) remains unchanged.
How will these new fees affect smaller portfolios?
For portfolios under £32,000, the £48 annual fee can have a noticeable impact, especially when compared to Vanguard’s previous fee structure. Over time, these fees can erode your portfolio’s growth potential, particularly for investors starting with smaller balances.
Why are Managed ISAs and SIPPs exempt from the new fees?
What are the key differences between platforms like Vanguard, InvestEngine, and Trading 212?
- Vanguard: Known for its low-cost index funds and simplicity but limited to Vanguard-only funds. The new fees can make it less appealing for smaller portfolios.
- InvestEngine: Offers zero platform fees for General Investment Accounts and ISAs, as well as features like AutoInvest and pension transfers. Ideal for cost-conscious investors.
- Trading 212: Provides commission-free trading and access to funds that track Vanguard’s LifeStrategy Fund. However, it doesn’t yet offer pension services.
Which funds on Trading 212 track Vanguard's LifeStrategy Fund?
Trading 212 offers various funds that mirror the diversification of Vanguard LifeStrategy Funds, such as:
- iShares Core MSCI World ETF
- Vanguard FTSE All-World UCITS ETF
- SPDR Bloomberg Barclays Global Aggregate Bond ETF
These funds can help investors build a well-diversified portfolio similar to Vanguard LifeStrategy Funds.
Disclaimer: This is based on personal opinion and is not financial advice. Always conduct thorough research or consult a financial advisor.
What should I do if I want to switch platforms?
- Research and compare platforms that align with your investment goals.
- Consider fees, investment options, and any potential transfer costs.
- Initiate the transfer process through your new platform, ensuring your investments remain tax-efficient.
Is switching platforms worth the effort?
Switching platforms can be beneficial, helping you save on fees and better align your investments with your financial goals. However, it’s not something that should be done too frequently. Selling funds too often can have drawbacks, such as:
- Potential Exit Fees: Some platforms charge fees for transferring out or selling certain investments.
- Missed Market Gains: Frequent selling might cause you to miss out on market growth during the transition.
- Tax Implications: Selling investments outside of tax-advantaged accounts like ISAs could trigger capital gains tax.
- Time and Effort: Researching, comparing platforms, and executing the transfer process can be time-consuming.
While platforms like InvestEngine provide tools and support to simplify the process, it’s crucial to weigh the potential benefits against these disadvantages before making a switch.
Download Your Free Financial Independence Guide!
Financial freedom is a goal we all share, but it can feel overwhelming. If you’re not quite ready to invest or feel the need to get your finances in order first, this free guide will help you take the first step.
Inside, you’ll discover:
- ✅ Step-by-step guidance to build an emergency fund.
- ✅ Proven strategies to reduce and consolidate debt.
- ✅ Tips for maximizing savings with high-interest accounts.
- ✅ Simple ways to start investing when the time is right.
💡 Take control of your finances today!
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