It looks like Vanguard is no longer the undisputed consumer champion of old. Vanguard’s USP has been waning for a while but the recent announcement of a £4 per month minimum charge for DIY investment services has put the tin lid on it.
Previously, Vanguard’s DIY investors paid a 0.15% platform fee calculated on their account balance. That made Vanguard excellent value for beginners, young investors, and anyone who can’t afford to put much away.
But from 31 January 2025, customers will pay £48 annually for portfolios worth less than £32,000.1
This is a huge change.
How Vanguard’s price rise affects small portfolio owners
Anyone with a £1,000 portfolio will pay £48 in charges or 4.8% of their account balance.
Previously they would have paid £1.50.
The numbers may not seem large until you consider that global equities post an average annual return of around 8%2.
At that rate, most of the example investor’s return will be consumed by fees. Precisely the fate that Vanguard’s founder, John Bogle, worked to help people avoid.
As Vanguard itself says, quoting Bogle:
Investors need to understand not only the magic of compounding long-term returns, but the tyranny of compounding costs; costs that ultimately overwhelm that magic.
Very true. And while all brokers are grappling with their own rising costs, an informed investor surveying the options will find that several other platforms are now more competitive than Vanguard for small portfolios.
Costly consequences
Vanguard’s £48 minimum means the platform is now only worth considering once you’ve amassed at least £19,200 in an ISA / GIA or £13,700 in a SIPP. (See below for our alternative picks).
You can sense-check your own numbers using the method we’ve previously outlined: How to work out which platform is cheapest for you.
Do that and if your portfolio is worth well over £32,000 then you may be left wondering what all the fuss is about. You won’t see any fee hike at that level.
On the other hand…
Vanguard alternatives for small portfolios
Disclosure: Links to platforms may be affiliate links, where we may earn a small commission. It doesn’t affect the price you pay nor how we judge the brokers. This article is not personal financial advice. Your capital is at risk when you invest.
The best Vanguard alternative right now is InvestEngine. InvestEngine’s platform charges and dealing fees are precisely zero for all account types including SIPPs.
InvestEngine hasn’t previously enabled SIPP transfers. But it’s now making an exception for Vanguard customers.
If you’re wondering how InvestEngine can afford to offer its services for free, here’s its own explanation. But please read our zero commission broker article, too.
InvestEngine is covered by the standard £85,000 FSCS investor compensation scheme.
Unlike Vanguard, InvestEngine is an ETF-only platform. I don’t think that’s a barrier though as ETFs are now cheaper than funds for many asset classes. And InvestEngine offers plenty of options, including non-Vanguard providers.
- Here’s our take on ETFs vs index funds.
Another zero-fee alternative is Prosper.
Prosper is every bit as cheap InvestEngine. Again, you can read its own explanation on how it makes money.
Prosper is an app-only investing service, offering a limited number of index funds and ETFs – though Vanguard products are prominent. The range may be small but it has the main asset classes covered, and typically includes a competitive index tracker in each category.
Prosper also includes a SIPP in its account line-up, alongside an ISA and GIA as usual.
The firm itself is relatively new. But it is protected by the FSCS scheme.
Cheapest Vanguard alternatives if you prefer better known brands
These options are worth considering because they couple free fund trading with a low percentage platform fee:
Close Brothers:
- Pros: 0.25% platform fee, zero dealing fee on funds.
- Cons: Expensive SIPP.
HSBC Global Investment Centre:
- Pros: 0.25% platform fee, zero dealing fee on funds.
- Cons: Restricted number of non-HSBC index funds. No SIPP.
Fidelity:
- Pros: Cheap SIPP so long as you invest monthly – 0.35% platform fee, zero dealing fee on funds.
- Cons: £90 minimum annual charge if you don’t invest monthly. Applies to accounts worth less than £25,000.
Santander Investment Hub
- Pros: Cheap SIPP – 0.35% platform fee, zero dealing fee on funds. The same price as Fidelity but no penalty for failing to invest every month.
- Cons: Bad Trustpilot reviews albeit from a limited pool.
Dodl by AJ Bell:
- Pros: Dodl by AJ Bell is cheaper than the rest except InvestEngine and Prosper – but only once your portfolio passes the £4,800 mark.
- Cons: Highly restricted fund and ETF list. £12 minimum annual account charge.
Any other contenders?
There are a few more zero commission trading apps available but they don’t occupy the same space as Vanguard. While such firms offer ETFs, they’re primarily focussed on trading and speculating on high-risk assets.
Still, you can check many of them out via our broker comparison table.
Transfer day
There aren’t any exit charges to pay if you’d like to transfer your account away from Vanguard.
Transferring is simple enough though it may take a few weeks.
If your new broker doesn’t offer a Vanguard product then your investment will be sold to cash and the money moved over instead.
Here’s Vanguard’s page on transferring out.
These pieces explain what to watch out for:
- How to transfer a stocks and shares ISA
- How to transfer your SIPP
- What are the risks of being out of the market?
What a pity
This isn’t John Bogle’s Vanguard anymore.
A fee cut on its index funds is vanishingly rare these days. Over the past several years, the company focused more on adding higher-fee active funds to its roster. Now it’s squeezing small investors.
Under Bogle, Vanguard changed the face of the investment industry through its relentless pursuit of a simple proposition: If it’s good for our customers, it’s good for us.
In so doing, it forced its competitors to become more like Vanguard – to the benefit of millions of people.
Now though Vanguard is starting to look more like everyone else.
Take it steady,
The Accumulator
@TA:
Re: “This isn’t John Bogle’s Vanguard anymore.”
Says it all really.
Do you happen to know if this rot only applies to Vanguard in the UK?
Thanks so much @TA for getting this out so quickly, such stars you are! Agree this is disappointing and a bit concerning. The question raised for me (or to be more precise, Mrs 2MY) is where this leads in decumulation, as the SIPP total quickly drops below the threshold (TFLS), followed by small, tax-efficient drawdowns which are, of course, now fee-inefficient! Many of the ‘comparable’ alternatives cited are not so hot on drawdown, rather limiting the field.
I’m rather inclined to swallow the marginal cusp fee difference for the remainder of accumulation – eponymously two (but actually now one!) more year – and see how this all shakes out.
Always an interesting position for an investor-safety over cost savings?-it’s a perennial question
Vanguard putting up its up its fees for small portfolios shows the current cost pressures platforms are under-straws in the wind?
At the end of the day it’s a gut feeling or investor instinct needed to decide where where to put your hard earned monies-not an entirely satisfactory way of making investment decisions!
The old saying “If it’s too good to be true then it probably is!” still has value as a guide to investment
As an Equitable Life survivor early on in my investment career I learnt quickly to fly investment wise just below the radar-safety first-slightly lesser interest rates,slightly more expensive platforms but portfolio has survived and prospered plus I can sleep at night!
xxd09
Thank you! You are indeed a star.
Thank you for the write up TA. Vanguard transfer process is already very slow but the rush for exit now will probably make it even worse. I’m not sure I like the idea of Vanguard giving only 6 weeks notice for affected customers to transfer out. And as you pointed out, their costs are no longer competitive (e.g. VWRP vs ACWI / HSBC All-World).
I am not directly affected by the fee change due to the current balance levels, but decided to finally move away. The SIPP will go to Fidelity and ISA to IWeb.
PS:- IWeb transfer web form said Vanguard supports electronic transfers and I don’t need a signed form. But on completion of the process it asked me to print, sign and post a transfer form anyway. Not sure if it’s actually needed.
I’ve decided to change from regular investments to annual so I can make use of iWeb’s ISA without the trade penalty. The decision was mainly to keep invested in the same assets as I had with Vanguard and in a platform I trust (Halifax group).
I’ve asked Propser support some questions and they just responded. Hope it’s of use to anyone looking into them.
1. Do you accept transfers in for SiPPs and ISAs?
– Yes
2. Is in-specie transfer in and out supported for both SIPP and ISA?
– Yes
3. Do you support fractional shares for ETFs?
– No – this is something we may consider in the future.
4. Is regular investment via direct debit available?
– No. You can set up a standing order with your bank.
I am unaffected due to my
balances with Vanguard but I don’t like the direction they are going in. An advisory team (thankfully short lived) but now a focus on a Managed ISA proposition as an entry point, which is intellectually the same thing as an advisory team. Newer funds with higher fees rather than low cost focus on the ones they have.
They had a clear proposition that made them stand out in a crowded field. I hope this is a blip.
Thank you TA for another timely piece – I have been reading for a few years now but this is my first comment.
I was concerned about the fees on our daughter’s Junior ISA which is currently under £10k but I called Vanguard and was told that this £4/mth charge would not apply. Thought I would share in case of interest to others.
Otherwise, yes I agree this is a huge departure from Vanguard’s core ethos and a disappointment.
They cut the fees on their managed isa though and if that’s all you have, you avoid the 4 per month, I read it in the ft that they’re sheparding people with smaller balances towards that.
Imagine what you could do with the money you’d save :p
Iweb waiving their 100 opening fee on isa…
@WinterMute
Amusingly, I was just comparing VWRP or HSBC All-World today, and it seems like a wash.
HSBC All-World has lower OCR headline rate, but they seem to take 25% of the monies from securities lending, and their tracking of the index is FAR inferior to Vanguard’s VWRP. Admittedly, HSBC’s 5-year performance seems marginally better, but as that comes from over and under-shooting their index it is a dubious advantage at best.
In the end, I am happy to be invested in both, but if I had to choose, I would go with the Vanguard offering.
(Note that technically I am not using VWRP but 90% in Vanguards FTSE Developed World UCITS ETF (VHVG) and 10% in Vanguard’s FTSE Emerging Markets UCITS ETF (VFEG). This is effectively the same as VWRP, but a lot lower OCR.)
Hi, I have a query. Is £32,000 threshold apply to all accounts collectively or on each of the accounts separately, like on SIPP, ISA and trading account ? If I add up my Vanguard shares in all these accounts it goes up to £32,000 but if I look at these accounts individually they are all below £32,000.
Can I ask a silly question just for clarity. Does this fee apply if you have vanguard funds held with another provider like HL (i know not the best value but just as an example). Or does this fee only apply to investors who invest into vanguard funds using their own vanguard platform?
I moved an ISA from a high cost platform (HL) to a low cost one (iWeb). I would say that I am very happy with this decision except that the iWeb interface is awful on a mobile and on a PC, plus the login authentication is antiquated. I am basing my approach, influenced by the excellent Monevator site, on keeping costs low at both at platform and fund level. However, based on my experience with iWeb it is true that cost isn’t everything when it comes to platform choice. Low cost platforms that DO have good interfaces/apps/autentication AND low costs and include Vanguard (though per article now only if you have a larger amount), Interactive Investor, and Invest Engine. I agree IE is an excellent choice, especially the rebalancing function which is utterly cool. It is genuinely different, but I am still a bit cautious about what you could call its gamification side. Still trying to decide if I’m too old for IE!
@Mona
I believe that the fee threshold refers to the total value of the pot across all your accounts. So you should not see any difference as the total value of your holdings is above £32K.
@OT
The fee will only apply to people who hold Funds/ETFs with the Vanguard brokerage. So people who hold Vanguard Funds/ETFs with other brokers (for example HL) will not be affected.
@Mona – The minimum fee threshold is applied on the total amount invested across all accounts, although if you don’t pay fees by direct debit the fee is split per account (e.g. 2 accounts, each of them charged £2/month)
@OT – the fee only applies to accounts held with Vanguard, not their funds on a 3rd party platform.
Thanks for covering this issue! I will be affected by this change and a switch to InvestEngine makes sense for me. I hold a Vanguard LifeStrategy 80% equity fund. Could anyone please advise the most obvious switch to make from the choices offered by InvestEngine?
@Al C – from what I’ve read, US commentators have noticed the slide too.
@2More – good point! If you didn’t fancy Santander then:
-Aviva offer 0.4%, no drawdown charge.
-AJ Bell offer 0.25% at £1.50 a trade, no drawdown charge. Could work if you operated a 1 or 2 fund portfolio and withdrew annually.
-Beyond that it’s the heady heights of Hargreaves Lansdown.
@Winter Mute – great stuff, thank you for the extras.
@Clay – Thank you! I should have mentioned that.
@Matthew – it’s a fair point. Depending on the fund costs, the managed ISA could work out more cheaply than some of my alternatives at 0.2%. I’d guess that there are plenty of people in the market who would prefer this approach. But much depends on the fund choice.
@Mona – you add them all up, so you’re over £32K. Which means you should already be paying around £4 a month for your Vanguard services i.e. £32,000 x 0.15% = £48 annually.
@Ben Ber : Thank you, that’s good point regarding the HSBC All-World fund. I’ve also noticed that it’s more volatile compared to VWRP.
Guess I’ll stick with VWRP in my ISA for now. I’m happy with SSAC is my SIPP although it’s tracking the MSCI ACWI index.
@Sue:
80% VWRP
20% IGLH
If you want to keep the multi-asset fund approach then take a look at:
LifePlan 80
https://investengine.com/etfs/lifeplans/73/?back=%2Flifeplans%2F&analytics-breakdown-tab=composition
It’s approx the same as what you’re paying at VG (before the price rise) when you add the platform fee and TER/OCF together.
Alex on email has pointed out that Barclays Smart Investor also offer 0.25% platform fee, zero dealing fee on funds for ISA and GIA.
I kept them off my list because Barclay’s only offer 12 tracker funds versus a broader selection at its 0.25% rivals – Close Bros and HSBC.
That’s possibly a bit harsh though as HSBC only have 15.
I don’t imagine Prosper being sustainable as it is, keeping the interest on cash seems like they’ll generate a fraction of a pittence…
Thank you for the article perfect timing. My Daughter has about £9K in her Vanguard Sipp which has been funded by me. She also has a Nest 2047 Retirement Fund which is currently not being added too. This only has about £6K in it.
I am planning to add £3K per year to her pension going forward and am currently looking at the options. If I add to the Nest pension, they charge 1.8% on any new contributions and then 0.3% management charge. They also have very limited funds to choose from.
I think in this instance she would be best to transfer her Nest Pension to Vanguard giving a total of £15K before my contributions. I certainly do not want to contribute to the Nest Pension.
If you have less than £32k in a SIPP I wouldn’t get too worried about the Vanguard price hike. If you’re a DIYer, a decade or more away from retirement, and still working you can just go to one of the no-fee houses like InvestEngine and put your money in a Vanguard S&P tracker like VUAG (TER 0.07%) and let it ride. Or blend yourself a simple three-fund portfolio and rebalance it every quarter or so.
The point is, for smaller balances there’s not any real advantage to getting full service portfolio management, so why pay for it? DIY is pretty straightforward and there are plenty of great low-cost fund choices around that cater to whatever risk profile you want.
I hope that anyone deciding to close their accounts, then I hope they have a better experience than us. My wife instructed Vanguard to transfer her ISA to HL back in 2022 and then close the account. They eaked it out for as long as possible: taking a month to acknowledge the request, and then another 30 days to transfer the cash. Even then they didn’t really close her account (despite several further requests to do so) and they still send her statements and T&C notices to this day. Useless.
@TA (#18):
Thanks, but that news might just be a tad more worrying.
Could I bother you for some examples please?
Perhaps a silly question but could I ask where the figure of £19,200 comes from (as what one should have in their ISA for it to be worthwhile staying with Vanguard)?
@TA One other advantage I don’t see covered is that Barclays Smart Investor is a flexible ISA. Not sure if HSBC is? That was a key reason for me in picking Vanguard, though my balance there is now transferring to iWeb and like many I’m in the process of choosing an alternative for accumulation, so thanks for the timely article on this!
@Nostalgia
With a balance of 19,200 the new Vanguard minimum fee of 48 is equivalent to 0.25% which is a common rate at competing platforms.
@Hal – I didn’t realise Nest charges were that high. I’m a bit shocked.
@Al Cam – Allan Roth has written a handful of articles over the years discussing pros and cons. Though he remains with Vanguard AFAIK. Harry Sit has left. The Bogleheads is good for taking the temperature on Vanguard.
@nostalgia – it’s a very fair question! Take the Vanguard minimum fee of £48. Divide by the percentage fee of nearest paid rival:
48 / 0.0025 = 19,200.
Though if you compare against Dodl, Vanguard can only draw level at £32,000 and can’t beat a zero fee broker.
@Hapshade – Cheers! Nice point on the flexible ISA. None of my listed alternatives offer one. (I list all the flexible ISAs I know about on the broker table). Trading 212 does have a flexible ISA though, and is zero fee. There I’ve said it 😉
The price competitor to VWRP now is FWRG.
If you compare the performance (I use JustETFs charting) since inception they are within a few bps over 18 months.
Perfect pairing on these cheap (or free) ETF platforms like InvestEngine
The Global All Cap fund can be replicated almost perfectly with a few ETFs on IE as well, at a lower total fee. I do 80/10/10 SWDA/WLDS/EMIM which weighs in at 0.21% for exposure to 8,000 stocks tracking the ACWI IMI.
@TA (#30):
Thanks for those tips.
I can certainly see what you mean re the rot/slide (#1, #18).
A platform fee with a minimum amount is probably a sensible business approach to be fair to Vanguard
Vanguard is the USA is a mutual , not so for its international operations.
Vanguard’s cap of £375 pa is quite high, preference would ii or HL with their fixed cost offerings.