Why small fees make a big difference
A fee of 1% a year sounds tiny. But it's taken every year from your whole pot, including the growth you've built up, so it compounds against you. Over 25 years, the gap between a 0.3% and a 1.5% fee can run into tens of thousands of pounds.
What fees should you include?
- Platform or account fee: what your investment platform charges to hold your investments, often a percentage.
- Fund ongoing charge (OCF): what each fund charges, shown in its key information document.
- Adviser fees: if you pay an ongoing percentage for advice.
Add them together for each option. Fixed fees, such as £5 a month, can be turned into a percentage by dividing the yearly cost by your pot size.
Trading costs: the hidden fee
Every time you buy or sell, you usually pay a spread or commission. Frequent trading multiplies these costs. For example, paying 1% on each trade and trading your whole pot ten times a year costs roughly 10% a year, which is more than most investments return. Holding low-cost funds for the long term keeps this cost close to zero.
Is a higher fee ever worth it?
Sometimes. A more expensive fund or adviser can be worth it if they add more than they cost, for example through better planning or tax savings. The calculator shows how much extra value they'd need to add to break even.
Frequently asked questions
How much do investment fees really cost?
It depends on the amount and time. As a rough guide, each extra 1% a year in fees can reduce your final pot by roughly 15% over 25 years.
What is a good level of fees?
Low-cost index funds often charge well under 0.3% a year, and platform fees vary. What matters is the total you pay and what you get for it.
Are percentage fees or fixed fees better?
Fixed fees tend to be cheaper for larger pots, and percentage fees cheaper for smaller ones. Convert both to a yearly percentage of your pot to compare them here.
Does this include tax?
No. The calculator compares fees only. Holding investments in an ISA or pension can shelter growth from UK tax.