Vanguard’s reputation as a low-cost investment platform has been a cornerstone of its appeal to DIY investors in the UK. However, significant changes are on the horizon, as Vanguard introduces a new minimum fee structure starting January 2025. In this article, we’ll unpack the details of the updated fees, analyse their impact on investors, and explore alternative platforms for those seeking cost-effective investment options.

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What Are Vanguard Updated Fees?

From January 2025, Vanguard will implement a minimum fee of £48 annually for investors who choose the self-select option. This fee applies to all accounts except Junior ISAs or those using Managed ISAs or pensions. Key details include:

• Self-Select Investors:
  • Minimum fee of £48 per year.
  • 0.15% annual administration fee remains unchanged.
  • Fund and ETF charges of 0.10% to 0.30% still apply.
• Managed ISAs and Pensions:
  • Reduced all-in fee of 0.51% annually.

For investors with balances below £32,000, the minimum fee makes Vanguard less competitive compared to other providers.

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Why Is Vanguard Introducing These Changes?

Vanguard cites rising costs associated with maintaining its platform and services as the main reason for these changes. While this move might help Vanguard sustain its operations, it disproportionately impacts smaller investors who have historically benefited from Vanguard’s low fees.

According to recent data, the average Vanguard customer balance is £38,100. This means a significant number of investors may feel the pinch, particularly younger individuals with lower balances.

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How Do Vanguard’s New Fees Compare to Competitors?

To provide context, here’s a comparison of annual costs for a ready-made ISA at different portfolio values:

For smaller balances, platforms like AJ Bell, Nutmeg, and InvestEngine become more attractive. Notably, InvestEngine offers a fee-free option for ETF investors.

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Who Will Be Most Affected?

The new fees will primarily affect:

• Small Portfolio Investors:
  • Investors with less than £32,000 in their self-select accounts will face increased costs.

• DIY Investors:
  • Those who prefer choosing their own funds and ETFs may now need to reconsider their platform options.

• Younger Investors:
  • Vanguard’s customer base skews younger, and these changes could deter new investors with smaller initial investments.

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Alternatives to Vanguard for UK Investors

If you’re considering moving your investments due to Vanguard’s updated fees, here are some alternatives:

1. InvestEngine

• Why Choose It?
  • Zero admin fees for ETF portfolios.
  • Easy-to-use platform with a focus on ETFs.
• Best For: ETF enthusiasts and those seeking cost-efficient investing.

Read the comprehensive InvestEngine Review.

2. AJ Bell (Dodl)

• Why Choose It?
  • Competitive fees for smaller accounts.
  • Balanced fund options for beginner investors.
• Best For: Investors looking for low-cost funds with decent choice.

3. Nutmeg

• Why Choose It?
  • User-friendly platform with managed portfolio options.
  • Transparent fees and good customer support.
• Best For: Beginners seeking a hands-off approach.

4. Interactive Investor

• Why Choose It?
  • Flat-fee pricing, ideal for larger portfolios.
  • Comprehensive tools and research.
• Best For: Experienced investors with significant holdings.

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Conclusion: Is Vanguard Still the Best Option?

While Vanguard remains a strong contender for investors with larger portfolios or those opting for Managed ISAs and pensions, its appeal to small DIY investors has diminished with the new fees. For investors prioritising low costs, platforms like InvestEngine offer a compelling alternative, especially for ETF-focused strategies.

Ultimately, the choice of platform depends on your investment style, portfolio size, and need for additional features. With InvestEngine’s zero admin fees, it’s worth considering a switch to maximise your returns.

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