Vanguard in the UK has changed its fees, so in this video we'll look at what has changed, why, who's affected, and also what you can do about it and, of course, what I think about the change. Let's begin with what's going to change, and here's an

excerpt from the email which I received on December 12th. And what this basically says is that previously you would have paid 0.15% of your invested amount – that's your annual fee. Now I pay that as cold hard cash as a direct debit, but from the

31st of January, what's going to happen is that if you have an account which has less than £32,000 invested, then you're going to have to pay a fixed fee of £4 a month or £48 a year. If we look at that

graphically, you can see that the area which is affected is for people with low balances. Now, previously the fee that you pay would just scale up in a linear fashion; it would just be 0.15% of the invested amount. What happens now is that

you have a kink at the bottom of this line such that you have that minimum payment. Then, at the high end of the invested amount, the fee caps out at £375 a year. So, beyond that point, beyond the £250k invested point, Vanguard effectively becomes a fixed-fee platform.

Now, for some time, Vanguard has not been the cheapest platform in the UK. Indeed, if you buy Vanguard funds on other platforms, it was cheaper. They're perfectly aware of that and they were perfectly happy with it, it seemed. So I thought the next step would be a

Cut in fees that they'd offer across the board, but this is not what's happened at all. So why is it that Vanguard's decided to do this now? Well, Vanguard's very clear about it in the email which they sent out. They say the introduction of

the minimum fee is necessary to help us cover the rising cost of servicing our clients. Remember that Vanguard spends quite a lot in offering customer support, and I think that's what really sets apart some platforms from others. Some of them have someone who you can call and

people find that very reassuring, at least some people. Other platforms' support is almost non-existent because they're trying to save money. And it's not a coincidence that at exactly the same time as they're introducing this small-balance higher fee, they're also cutting the fees on their managed ISAs.

The idea here is that, instead of deciding which of their 70 or so funds to invest in yourself, they have someone who actually decides for you based on your risk appetite. In a statement I saw in the FT, Ben Summers, who's head of

personal investing at Vanguard, said, "Through serving 700,000 people in the UK, we've seen there are many first-time investors that need a helping hand to manage and grow their money. We found that once people have made the important decision to start investing, they can

lack confidence in the management of their investments, hold too much cash, and have trouble constructing portfolios with the right funds and level of risk." So clearly here what they're trying to do is nudge their clients, the ones who are new to investing, into having this

a managed service that's also one of the goals of the regulator in the UK, which is to try and service those clients who don't have a lot of money but who need guidance early on; maybe not full advice, but certainly a nudge in the right

direction. So, who's going to be affected by this change? There was a pension review in 2022, and as part of the written evidence provided by Interactive Investor for that review, they produced this survey of people who are 55 or older. It's broken down by gender, and

you can see the invested amounts in pension pots. Now, what's pretty surprising is the low invested amounts in these pension pots. The vast majority of people who responded to this survey have less than £100K invested, and generally women have lower balances than

men. So clearly, that's going to affect people who've got less invested, and if we break it down by age, obviously that's people who are younger because they've had less time to invest. So the dashed red line that you can see on this graph is

the Vanguard cut-off when the fee starts to switch to 0.15%. So if you are on an investing journey, then the chances are now you probably are not going to start off with Vanguard, and I'm not sure that's going to be a positive both for their

long-term growth or for people trusting the platform. So this could be a bit of an own goal for Vanguard, and certainly based on the comments I've seen, there has been a lot of anger at this announcement. So some people have already decided, on the basis of this,

Announcement to close their Vanguard accounts and move to another platform. It's often the case that people have multiple platforms, just in case one platform fails. And again, this just means that they probably won't use Vanguard in that way. Someone else points out that this will disproportionately affect

young people, and it's not a great way to build trust. Another point of view is that Vanguard started out as low-fee but has basically been outsmarted by the competition. And then finally, someone says yes, they're moving, and this is a cynical move on Vanguard's part in order

to maximize their profits, which is pretty much what they said in their email. So what does this all mean? I think the first point is that platforms have to make money, and you have to choose what's important to you. It's not always about the lowest fees; it's also about

whether you want support, it's about the range of investments which you have on a platform, and of course, cheaper alternatives now exist. For example, on Trading 212, there's no fee for their ISA platform at all. Furthermore, their trading is commission-free, just as it is

on Vanguard, as long as you don't choose to trade immediately. InvestEngine, another platform which is offering a free ISA and now a free SIPP, and there again you don't have to pay commissions to trade. However, it's an ETF-only platform, and there's always some kind of

trade-off. Does it have good support? Does it have a wide range of investments? And do you like the interface? And then finally, I'd say fees change all the time, so I think it pays to stay nimble and not have any loyalty to any platform. Always be willing to switch to whatever

is best for you because it's now pretty easy. It is a pain, but it's worth it in order to keep your fees as low as possible. So I hope that's been helpful. If you did want to discuss this with other people, well, you can do that as

part of our community, and of course you'd be welcome to join us. Just go to pensioncraft.com/membership to learn more, and as always, thank you for listening.

DIY Investors Hit by Vanguard's New £4 Fee

My name is Ramin Nakisa and I started PensionCraft in 2016 as I felt strongly that I wanted to teach people how to invest well for themselves so they could stop making costly mistakes and losing their money through having to pay unnecessarily high fees.

Before starting PensionCraft, I worked in investment banking as a strategist and I was a frequent contributor on CNBC and Bloomberg TV. I have written two books about finance and investment: one for professional investors and one that explains how to buy and sell volatility using exchange-traded products.

I publish a new video on YouTube every Saturday and you can join me for a live Q&A on the 1st Thursday of every month at 7pm UK time.

If you want to learn how to become a better investor then why not join our friendly membership at pensioncraft.com?


DIY Investors Hit by Vanguard's New £4 Fee

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