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Decumulation: a real life plan

SWOT analysis for a decumulation plan

Living off your investments is the ultimate goal of financial independence (FI) and the trickiest part to get right. This phase is known as decumulation and it’s the part of the journey I’m about to embark on.

My objective is simple:

  • Drawdown enough income so that Mrs Accumulator and I can live without needing to work.
  • Maintain a decent quality of life.
  • Not run out of money before we die.

The key is to allow plenty of margin for error.

Our decumulation plan needs to cope with volatile market conditions, flawed assumptions, and the fifth law of thermodynamics: Grit happens.

What I’ll present – over three detailed articles – is our genuine, all-our-skin-in-the-game plan to meet this challenge.

This is no longer theoretical for me and Mrs A..

It’s the rest of our life.

My plan rests on the best practical research I’ve found over many years, fitted to our personal situation.

It’s resistant to the main threats that bedevil many decumulation strategies:

  • A long life – also known as longevity risk.
  • Inflation risk.
  • Living off volatile assets – sequence of returns risk.

I’ve built in multiple safety features. But I know there are no guarantees.

Decumulation: time to get personal

My plan’s core components will be relevant to other decumulators, FIRE-ees, and near-retirees, regardless of our different circumstances.

Customisation is critical though, so here’s a list of our particulars:

  • Time horizon: 45 years
  • Chance we both live another 45 years: 8%
  • Decumulation method: annual withdrawals based on a sustainable withdrawal rate (SWR) from a portfolio of volatile assets such as equities and bonds.
  • Capital preservation required: No
  • Legacy required: No
  • Back-up sources of income: State Pensions due in approximately 18 years. Small Defined Benefit (DB) pension for Mrs A in the future. Ability to work if required, or as desired.
  • Inheritance: No

I’ve decided not to share our personal numbers. This plan scales regardless of wealth or income. I’ve left clues all over the Internet, anyway.

It may be helpful to know that we got here on relatively modest five-figure salaries and plan to live on less than the annual median household income.

That’s quite tight, which is why the plan is bold in some respects.

I’d love to take a ‘safety-first’ retirement approach. To rely more heavily on less volatile instruments such as defined benefit pensions, annuities, and index-linked government bonds.

Sadly, that route is unaffordable for us. But it’s definitely worth investigating if you have greater means.

My final, overriding, set-up point: my job has been fairly all-consuming for more than two decades. I’d like to live a fuller life now.

That entails risk.

That’s life though, so I’ll try to offset the risk via:

  • Multiple back-up plans
  • Awareness of the failure points
  • Conservative assumptions
  • Not believing this is fire-and-forget

Living life now means not waiting until we can live off the dividends or fund a conservative 3% SWR.

But a naive 4% SWR is too risky, in my view.

So how can I use more sophisticated decumulation techniques to deploy our wealth more effectively, without turning retirement into a decades-long tightrope act?

The first step is understanding what an acceptable failure rate is.

Failure is negotiable

Standard SWR studies define failure too narrowly.

If the simulated portfolio’s wealth hits zero before the end of its time horizon then it’s a fail.

But we humans can run out of life before we run out of money. If I flatline before my wealth does then… success!

Well, sure. Kinda. Sorta.

The point is that SWR failure rates are less risky when you factor in your own mortality.

If Mrs A and I have a 10% chance of both being alive in 45 years, and our portfolio has a 10% chance of giving up the ghost in that time (at our chosen SWR) then our actual failure rate is:

0.1 x 0.1 x 100 = 1% chance of running out of money and both of us being alive to worry about it.

That’s a 99% success rate! Always look on the bright side of death.

I’m assuming here that the portfolio will more easily support one person than two.

That matters, because there’s a 49% chance that at least one of us will be around in 45 years.

One person won’t be able to live half as cheaply as two, but the portfolio will definitely last longer if it isn’t financing my chocolate habit.

The upshot is I’m comfortable picking a higher SWR – based on a 10% failure rate – when it’s twinned with a reasonable life expectancy for both of us.

Remember, we only stand an 8% chance of both being around in 45 years, so I’m still choosing an optimistic life expectancy. There’s a 2% chance we’re both here in 50 years time.

Also, SWR sims don’t account for humans noticing when the bank balance is draining at an alarming rate.

In real life people put the spending brakes on years before their portfolio sparks out. (More on this later.)


Decumulation diversification

SWR research is generally based on single-country portfolios split fifty-fifty between equities and conventional government bonds.

In a nutshell, US-based historical studies may be too optimistic. But non-US studies don’t account for the contemporary advantages of global diversification.

Research into asset-class diversification generally shows a modest uptick in SWR.

As a UK investor I’m not going to bank on history repeating the stellar US asset returns of the past century.

But I’m happy that a diversified global portfolio could replicate historical developed world returns. Those were scarred by two world wars, after all.

Here’s my de-accumulation asset allocation:

Growth – 60%

  • 20% World equities
  • 15% World multi-factor (Size, Value, Quality, Momentum)
  • 10% UK equities
  • 10% Emerging Market equities
  • 5% REITS

(Note: there’s approximately 2% more UK exposure in the World funds.)

Defensive – 40%

  • 15% UK gilts (long, intermediate, and short durations)
  • 15% World index-linked government bonds (Hedged to £, short duration)
  • 5% cash (currently it’s 10%)
  • 5% gold (I don’t own this yet)

Most of my holdings are in cheap index trackers, though I will use active funds when I don’t have a good passive investing alternative.

I won’t use high-yield funds because I think that a total return strategy beats an income investing strategy.

Decumulation portfolio rationale

Here’s a short (ish) explanation of my decumulation portfolio choices. Happy to debate any of it in the comments after.


The expected returns of our equity holdings should provide the real returns we need to sustain our income over the decades. A strong equity allocation along with our State Pensions is our best protection against longevity risk.

It’s that or troughing out on deep-fried Mars Bars and cigarettes for the next 30 years. YOLO!

Adding a multi-factor holding to my equity split increases diversification at the price of higher fees, mitigated by the hope of slightly higher returns. This is debatable, optional, and may well be a slim hope.


The volatility of equity returns exposes us to sequence of returns risk. That is the chance that a poor run of market conditions sends our portfolio into a death spiral we can’t escape.

Another threat is high inflation whittling away the value of our defensive assets over the long-term.


Our defensive assets reduce our sequence of returns risk – as well as the stress of watching our main income source collapse during a market crash.

Conventional government bonds are likely to outperform other assets during a steep market decline.

Short duration bonds and cash guard against rising interest rates but they are much less effective than longer bonds when equities bomb.

(Cash sometimes outperforms bonds, especially in inflationary scenarios. It’s also easier to get change from a tenner than a 10-year gilt at Tesco.)

Index-linked government bonds are best against runaway inflation. Equities do badly in these scenarios. Equity inflation protection asserts itself in the medium to long-term, but linkers can pay your bills today.

We’ll hold linkers and conventional bonds in a 50:50 ratio.

Structural problems with the UK’s index-linked gilt market explain why I use developed world linkers.

For conventional bonds, choose a global government bond fund or total global bond market fund if you prefer. Just make sure it’s hedged to the £ (to eliminate currency risk) and that it’s overwhelmingly concentrated in high-quality bonds.

Match your bond fund’s duration to your time horizon to reduce interest rate risk.

Gold is a wild card that can perform when nothing else works. It’s typically uncorrelated to other assets and, in recent years, has spiked when people think the financial system is circling the drain.

I see gold as a one-shot wonder. It’s a shotgun blast in the face of some crisis occurring during the first 10-15 years of decumulation.

That early period is when we’re most exposed to sequence of returns risk. After that gold will be discarded like an empty weapon because its long-term returns are poor.

Triple threat

Does the age of negative interest rates, QE, and government bazookas mean we’re in for secular stagnation, rampant inflation, or stagflation on steroids?

Your guess is as good as the next clairvoyant. I’ll hedge my bets with that mix of equities, linkers, and gold.

In times past, I’d probably have been 50:50 split across bonds:equities on the eve of decumulation. Now I won’t go below 60% equities. I believe I can tolerate the extra risk.

If I couldn’t handle this large (ish) equity allocation, I’d need a bigger portfolio to sustain the same income. I believe high equity valuations and low to negative bond yields heighten the risk of anaemic returns over the next 10 to 15 years.

A diversified portfolio in itself is only worth a small SWR raise, so I’ll also use a dynamic asset allocation strategy to try to squeeze a bit more juice out of my pot. This means my equity allocation could hit 100% if the market stays down for years.

Before I check out

In my next post I’ll explain how I plan to employ dynamic allocation – and dynamic withdrawals – to finesse my plans. Subscribe to make sure you see it.

Take it steady,

The Accumulator (though not for much longer)


Weekend reading: Where to stash the cash in a crazy world

Weekend reading logo

What caught my eye this week.

I sold a six-figure shareholding last week for a phenomenal capital gain – over 1,000%.

For historical reasons the shares were held outside of an ISA. This means I’ve got a big capital gains tax bill coming, despite years of defusing.

The sheer size and hence risk of this single position – and the awkwardness of trading it outside an ISA – meant something had to be done. Rumours that Rishi Sunak might raise capital gains tax rates tipped me over the edge.

Like most taxpayers I remind myself I support an accessible health service and a welfare safety net. My sister is a nurse.

Thank you NHS.

But not to the tune of a mooted 45%!

To stash or not to stash the cash

The lessons of this investment – and of getting rid of it – will be fodder for a future post. As will be my specific findings from what happened next.

Which was deciding what to do with it.

Remember, I’m running a big interest-only mortgage, which through one lens is borrowing to invest. So somewhat risky.

Euphoria abounds in the stock market today – and elsewhere. Bitcoin just breached $56,000. Bulletin boards are blowing up hedge funds. Growth stocks seem unstoppable.

Even with nominal yields on government bonds sneakily rising, real yields remain very low and confidently predicting an imminent bust is folly. But it hardly seems imprudent to take some money off the table.

The trouble is where to put it?

I knew, of course, that rates were very low. I sort of assumed if I dug around I’d eek out something decent across multiple savings accounts.

But no, not to the extent it’s worth the hassle.

Long story short, Premium Bonds seem about as good a place as any for the maximum I can put in them.

I will keep a further chunk in cash, despite inflation eroding its value. I’ve felt too light on cash ever since I bought my flat, and I love Jamie Dimon’s description1 of having a fortress balance sheet. It’s time to rebuild my walls.

Otherwise, I’m thinking I might actually throw a few pennies at that big interest-only mortgage that half of you hate so much!

I’d presumed I’d run my mortgage full tilt for a decade, at least. But it is looking like some of my expected investment gains have probably been front-loaded.

What’s more, my bank’s rates have already floated off the floor. I have two years left of my very low five-year fixed rate to run. Given the odd way I got this mortgage, the end of this term could be a non-trivial event.

It’s still tempting to stash the cash rather than lock it away forever by paying down some of my mortgage. Even at a cost of lower returns from savings. The set aside cash could cover several years of monthly mortgage payments in a pinch. Sunk into the mortgage, it only reduces monthly payments by less than £100.

Also it’s entirely possible I’ll never be able to get a mortgage of this size again. Not without buckling down and ramping up my earnings, and even that hasn’t helped in the past. (I’m self-employed, one way or another.)

On the other hand, repaying debt charged at 2% looks sweet in a world that barely pays you for lending it cash and expects every share to go to the moon.

Lucky bastard

I’m aware this problem is plucked from the box marked Nice Problems To Have. Despite vast State support, many people and businesses have been hit hard by the pandemic – including several unlisted companies I’ve invested in.

How they’d love to have the headache of where to stash thousands of pounds in cash.

All I can say is I planted the seed of this windfall many years ago, when times were good and most people were spending freely. Now my investment has matured and blossomed. We all have to manage our own finances as best we can, whatever is going on in the world.

Luck won’t always go my way. That’s why I – like you – save and invest for the future. I fully expect to be hit by future tax rises, too, to pay for furlough and other breaks I didn’t get a penny of (but nonetheless supported).

But that’s more article fodder, I guess. Another dividend from reshuffling my assets!

Where would you stash the cash – or would you just save it for the mother-of-all post-lockdown parties? Let us know in the comments below.

Otherwise have a great weekend.

[continue reading…]

  1. Possibly pinched from Warren Buffett. []

Capital gains tax on shares

A ticking time bomb acts as a visual metaphor for the need to defuse capital gains tax on shares and other investments.

With the tax deadline looming, it’s time to worry about capital gains tax on shares. Capital gains tax (CGT) falls due on investments you sell for a profit in any given tax year, unless:

  • The asset is sheltered in your ISAs or pensions.
  • Your gains are covered by your annual capital gains tax allowance.
  • Your gains can be sufficiently offset by your trading losses on other shares and assets. See our guide to defusing your capital gains below.
  • The asset is exempt from capital gains tax.

CGT on shares and other assets is payable on your profits – that is, the difference between what you bought the asset for and what you sell it for, after costs.

For example if you buy a share for £100 and sell it for £1,100 ten years later, then your gain equals £1,000.

CGT is payable on your total taxable gains in a tax year. All capital gains and losses are pooled together for HMRC purposes.

If you fall into the ‘liable for tax’ net then you’ll pay CGT on the gains you’ve made above your tax-free allowance.

However, there are plenty of strategies you can legitimately use to reduce or eliminate capital gains tax on shares.

How much capital gains tax on shares?

The capital gains tax rate on shares and other investments is:

  • 10% for basic rate taxpayers.
  • 20% for higher rate taxpayers and additional rate taxpayers.

Other investments are also taxed at the same rate as shares, except for second-homes and buy-to-let properties.

The CGT rate for property is:

  • 18% for basic rate taxpayers.
  • 28% for higher rate taxpayers and additional rate taxpayers.

The rate you pay normally depends on your total taxable income, and what sort of assets you’ve made a profit on.

Beware that basic rate taxpayers can pay CGT at the higher rate, if your gains nudge you up a tax band.

You can work it out like this:

  • Subtract your annual CGT allowance from your total taxable capital gains.
  • Now add to that your total taxable income (including salary, dividends, savings interest, pensions income and so on, minus income tax allowances and reliefs).
  • You pay the higher CGT rate on any profit that falls within the higher-rate income band.

Note: Scottish and Welsh taxpayers pay CGT at UK rates. A higher-rate Scottish taxpayer may pay capital gains tax at the UK basic taxpayer level.

You need to report your taxable gains via your annual self-assessment tax return.

Do this if your total taxable gain in the tax year exceeds your annual capital gains tax allowance…


…if your sales of taxable assets are over four times the annual CGT allowance.

For example, if you sold £70,000 in shares, you’d report the gain, because the amount sold is higher than four times the CGT allowance of £12,300.

Remember that sales of assets in ISAs and SIPPs aren’t reported, and so don’t count in your sums at all.

Offshore funds may pay tax even higher than CGT rates

Capital gains on offshore funds are taxed at higher income tax rates – rather than CGT rates – if they:

  • Do not have UK reporting fund status.
  • Aren’t protected by an ISA or SIPP.

Check that the offshore funds you own (i.e. any not domiciled in the UK) have UK reporting fund status. This should be indicated on the fund’s website. HMRC also keep a list of reporting funds here.

A kicker is that you can’t cover non-reporting fund gains with your CGT allowance, either.

Capital gains allowance on shares

The annual capital gains tax allowance (or Annual Exempt Amount) for your total profits is:

£12,300 from 6 April 2020 to 5 April 2021.

The UK Government regularly issues updates on CGT.

Capital gains tax exemptions

Some investments and other assets are exempt from capital gains tax:

  • Your main home (in most cases)
  • Individual UK Government bonds (not bond funds)
  • Cash which forms part of your income for income tax purposes
  • NS&I Fixed Interest and Index-Linked Savings Certificates
  • Child Trust Funds
  • Premium bonds
  • Lottery or betting winnings
  • Anything held in an ISA or SIPP

Capital gains tax is payable on shares, ETFs, funds, corporate bonds, bitcoin (and other cryptocurrencies), and personal possessions worth over £6,000, including some collectibles and antiques.

Avoiding capital gains tax on shares

You can reduce your tax bill by offsetting trading losses against your capital gains. This is known as tax loss harvesting and it is a legitimate way to avoid capital gains tax on shares.

Terminology note Tax avoidance means legally reducing your tax bill such that HMRC won’t raise an eyebrow. Tax evasion involves things like owning shell companies like some people own shell suits, and funneling cash to places with super-yacht congestion problems. These days the best phrase to use in polite society is tax mitigation.

Tax-loss harvesting involves selling shares and other assets for less than you originally paid for them. You strategically sell assets to realise losses you are already carrying in your portfolio, thus minimising your capital gains.

You don’t try to create losses with bad investments! That is where people can get confused.

The goal is ideally to reduce your gains to within your CGT allowance for the year.

We’ve come up with a quick step-by-step guide to help you do this.

1. Calculate your total capital gains so far

Tot up the gains, if any, you’ve made from selling shares, funds, and other chargeable assets this tax year (starting last 6 April).

Your records (or your platform’s statements) are worth their weight at moments like this.

You need to include every sale you made over the tax year, regardless of what you did with the money afterward.

You make a capital gain on any share holding or fund (outside of ISAs or SIPPs) that you sold for more than you paid for it.

Work out each capital gain by subtracting the purchase value and any costs (such as trading fees) from the sale proceeds.

Add up all these capital gains to work out your total capital gain for the year.

Remember that shares and funds are not the only chargeable assets for CGT. You need to add all such capital gains into your total for the year. They all count towards your annual CGT allowance.

For example, any property – other than your main home – is potentially liable for CGT when you sell it.

See HMRC’s property guidance.

2. Calculate your losses

You register a capital loss if you sold shares, other investments, or a dodgy buy-to-let flat for less than you originally paid for it.

Add up all your losses over the year.

Grit your teeth, fling your hands over your eyes, peek at your grand poo-bah loss.

Remember it’ll be okay because you’ll harvest the loss to neutralise your gains.

Sales of CGT-exempt assets don’t count towards capital losses. You can’t count disaster-trades that happened within your ISAs and SIPPs, for example.

Now for the good bit – offsetting your losses against your gains.

Let’s say you made £15,000 in capital gains on shares over the year, and you made capital losses of £6,000. Your total gain is £9,000.

Your losses have trimmed your gains to within your annual CGT allowance. No capital gains taxes for you this year!

You can also offset unused capital losses you made in previous years, provided you notified HMRC of your loss via earlier tax returns. (Best do so in the future).

3. Consider selling more assets to use up more of your CGT allowance and so defuse future gains

You now know what your total capital gains for the year are (from step 1), after subtracting any capital losses (step 2).

If your total gains are higher than your CGT allowance

…then you’ll pay CGT on the gains above the allowance.

If you will have CGT to pay, then, before the tax year ends, consider selling another asset you’re carrying at a loss in order to offset that loss against your gains. This will further reduce or eliminate your capital gains tax bill.

If your total gains are less than your CGT allowance

…then you won’t have to pay any capital gains tax on those gains. You don’t need to report the trades to HMRC, either, provided the total amount you sold the assets for was less than four times your annual CGT allowance.

Before the tax year ends, consider selling other assets you’re carrying that are showing a capital gain. This enables you to use more of your available CGT allowance for the year – without going over the allowance, of course.

Like this, you defuse some of the capital gains you’re carrying. That may help you avoid breaching your CGT allowance in future years.

If you’ve made an overall loss in a tax year

…after subtracting losses from gains, then you should declare it on your self-assessment tax return.

Capital losses that you declare and carry forward like this can be used to reduce your capital gains in future years, when you might otherwise be liable for tax.

Losses can be a valuable asset, but only if you tell HMRC.

4. Reinvest any proceeds from sales

If you made any share sales to improve your capital gains position, then it’s time to reinvest the cash you raised.

These are the key techniques:

Bed and ISA / Bed and SIPP – Ideally you’ll now tax-shelter the money you released within a stocks and shares ISA or SIPP. That puts that money beyond the reach of capital gains tax in the future.

You can purchase exactly the same assets in your tax shelters, immediately.

New asset – If your tax shelters are full and you don’t want to earmark the money for next year’s ISA/SIPP, then you can reinvest in a different holding as soon as you’ve completed your sale.

This new investment starts with a clean slate for CGT purposes.

Beware the 30-day rule – You need to wait 30 days to reinvest in exactly the same share, ETF, or fund outside of your tax shelters.

If you flout the 30-day rule, then the holding is treated as if you never sold it. That undoes all your tax loss harvesting work.

Same but different – You can sidestep the 30-day rule by purchasing a similar fund (or even share) that does the same job in your portfolio. For instance the performance gap between the best global index funds is usually small.

You can defuse your gain, buy a lookey-likey fund straightaway with the proceeds, and keep your strategy on course.

Bed and spouse – This is the ever-romantic finance industry’s term for keeping an asset in the family. You sell the asset and encourage your spouse or civil partner to purchase it in their own account.

Your gain is defused and your significant other starts afresh with the same asset. This maximises the use of the two CGT allowances available to your household.

Tax on selling shares

The cost of trading is a bit like a tax on selling shares, and it’s a can’t ignore factor that means selling for tax purposes isn’t always a good idea.

Trading costs include dealing fees, any stamp duty you pay on reinvesting the money, and also the bid-offer spread on the churn of your holdings.

Trading costs can significantly damage the benefit of defusing gains – especially on small sums – and even more so if you pay CGT at the basic taxpayer’s rate.

It’s best to realise capital gains as part of your rebalancing strategy, when you’re already spending money to reduce your holdings in outperforming assets while adding to the laggards.

Deferring capital gains tax

You can defer capital gains tax on your shares and other assets by never selling.

No sale, no gain, no capital gains tax.

This is especially relevant if you’re an income investor who hopes to live off their dividends for the rest of their life.

In this case, you simply enjoy the dividend income from your shares and let the capital gain swell.

A risk though is you could someday be forced to sell.

Unforeseen emergencies are one problem. Routine events such as company takeovers, fund closures, or mergers can also count as disposals for CGT purposes. Then you’ll be hit with a big tax charge on the gains.

Best practice would therefore still be to try to defuse gains as you go, by using your annual CGT allowance as described above. This reduces the tax impact of any unforeseen sales in the future.

Capital gains tax on inherited shares

Capital gains tax is not payable on the unrealised gains of shares belonging to someone who dies.

Inheritance tax may be due on the value of the shares, but not CGT.

Any gain you make between the date of the person’s death and your disposal (of the shares, not the body) does count for capital gains tax purposes. That’s assuming you couldn’t tuck the assets in a tax shelter.

Capital gains on shares help

HMRC issues lots of guidance on calculating capital gains tax on shares.

It’s also tax article law that we writers must include a warning about ‘not letting the tax tail wag the investment portfolio dog’ in any discussion like this.

There is definitely a fine line to tread between avoiding a higher capital gains tax bill and becoming dangerously obsessed.

In practice, most of us can do a fair bit of selling to defuse CGT – without derailing our strategy – by repurchasing the assets within an ISA or SIPP.

Think of it partly as an insurance policy. You may as well use the allowances you’ve got now, in case you’ve got more money and more capital gains on shares in the future, but not more allowances. The CGT allowance could even be reduced or removed by a future government.

It’s a case of use it or lose it.


Our updated guide to help you find the best online broker

Okay, UK investors, after taking the pain of creating a whopping great comparison guide to the UK’s leading online brokers, we’ve once again returned to the battlefield to fully update it.

Eating a bag of rusty nails water would have been more fun, but it would not have produced a quick and easy overview of all the main execution-only investment services.

Fund supermarkets, platforms, discount brokers, call ’em what you will – we’ve stripped ’em down to their undies for you to eyeball over a cup of tea and your favourite tranquilizers.

Online brokers laid bare in our comparison table

Who’s the best broker?

It’s impossible to say. There are too many subtle differences in the offers. The UK’s brokers occupy more niches than the mammal family, and while I know which one is best for me, I can’t know which one is right for you.

What I have done is laser focus the comparison onto the most important factor in play: Cost.

An execution-only broker is not on this Earth to hold anyone’s hand. Yes, we want their website to work, we’d prefer them to not screw us over, go bust or send us to the seventh circle of call centre hell… These things we take for granted.

So customer service metrics are not included in this table. It’s purely a bare-knuckle contest of brute cost for services rendered.

Why should investors flay costs as if they were the tattooed agents of darkness? Because if – as the FCA predicted – you will see an annual after-inflation return of 2.5% on your portfolio for the next decade, then the last thing you need is to leak another 1% in portfolio management charges.

This makes picking the best value broker a key battleground for all investors.

Using the table

I’ve decided the main UK brokers fall into three main camps. These are:

  • Fixed fee brokers – Charge one price for platform services regardless of the size of your assets. In other words, they might charge you £100 per year whether your portfolio is worth £1,000 or £1 million. Generally, if you’ve got more than £25,000 stashed away then you definitely want to look at this end of the market. Bear in mind that fixed fee doesn’t mean you won’t also be tapped up for dealing monies and a laundry list of other charges.
  • Percentage fee brokers – This is where the wealthy need to be careful. These guys charge a percentage of your assets, say 0.3% per year. For a portfolio of £1,000 that would amount to a fee of £3. On £1 million you’d be paying £3,000. Small investors should generally use percentage fee brokers, but even surprisingly moderate rollers are better off with fixed fees. Many percentage fee brokers use fee caps and tiered charges to limit the damage but the price advantage still favours the fixed fee outfits in most cases.
  • Share dealing platforms – Platforms that suit investors who want to deal solely in shares and ETFs. Sites like X-O and friends fill this brief.

Choosing the right broker needn’t be any more painful than ensuring it offers the investments you want and then running a few numbers on your portfolio.

The final point you need to know is that this table’s vitality relies on crowd-sourcing. I review the whole thing every three months, but it can be permanently up-to-date if you contact us or leave a comment every time you find an inaccuracy, fresh information, or a platform you think should be added.

Thanks to your efforts as much as ours, our broker comparison table has become an invaluable resource for UK investors.

Take it steady,

The Accumulator