COSTS - SHARE TRADING
such as Hargreaves Lansdown, you’ll often be charged an annual fee of around 0.5%.8 However, for more flexible SIPPs which allow you to invest additionally in other assets such as property, building society accounts, etc, you will often pay a flat fee. For example, Prudential currently charges a £425 annual fee and a set-up fee of £300. This annual fee equates to 0.4% for a £100,000 portfolio – ie, not that different to the rates charged on the simpler ones. Note there are a few SIPP providers9 that offer them without annual charges, but this is still unusual, as there are administrative costs with running pensions that must be covered somehow. In addition to the above, some online brokers charge inactivity fees on all types of account they run (even non ISA/SIPP accounts). For example, if you have less than £7,500 in a TD Waterhouse account and are buying and holding shares, you’ll be charged £50 pa, ie an extra 0.7%+ per annum. Finally, online brokers are also making money from you on any cash you hold in their accounts while waiting to invest it. Most pay near 0% interest on cash, so there is an opportunity cost to you of nearly 3% pa compared to what you could be earning in a top instant access savings account.10
Tax doesn’t have to be taxing Taxation on investments has become relatively simple compared to a few decades ago. There is now just one main simple tax on capital gains (CGT). For basic rate taxpayers, it is currently 18% and for higher-rate taxpayers it’s 28%. 65