How to choose a provider for your Stocks and Shares Isa
Isas are a popular way for savers to squirrel away money. And given that these savings accounts are free from both capital gains and dividend tax, the Stocks and Shares Isa is particularly appealing to investors.
With all that said, not all Isas are created equal, and charges can vary wildly across providers.
Platforms can usually be divided into those with flat administration charges, and those that charge a percentage on holdings. So depending on your intention for the Isa, it pays to take care when deciding which provider to go for.
For example, if you’re an active buyer and seller, it might be more cost-effective to choose a provider with a flat trading fee, otherwise your savings could be wiped out by hefty dealing charges. Reinvestment fees, transfer charges, and exit fees can also hammer you if you aren’t careful.
So make sure you know the Isa inside out before using it as a platform to invest. If you’re trying to decide where is best to house your money, here is an overview of several Isa providers to help you get started.
AJ Bell Youinvest
This platform has low administrative and dealing charges.
For fund holdings, the annual administration charge is 0.25 per cent for the first £250,000. A 0.25 per cent annual administration charge, capped at £7.50 per quarter, is levied for non-fund holdings.
Fund dealing costs are £1.50, and £9.95 for non-fund dealing. This falls to £4.95 if ten trades have occurred in the previous month.
Watch out for the transfer- out charge though, which is £25 per holding.
Alliance Trust Savings
Investors pay £10 per month to have an ATS account, and there’s a flat charge of £9.99 per trade. Investors get four online trades per year included in the price of the administrative fee.
Given the flat fee, this is a good option for frequent traders. However, be aware that dividend reinvestment will cost £5.
Barclay’s Smart Investor
Admin fees depend on the underlying investments – you’re charged 0.2 per cent a year for funds, and 0.1 per cent for everything else. The minimum charge is £4 per month, and is capped at £125.
Online transaction costs also vary – £3 to buy and sell funds, and £6 for everything else. Automated regular investments cost £1, making this an attractive Isa for frequent buyers and sellers.
Charles Stanley Direct
This platform has an annual admin fee of 0.35 per cent, which is waived every month if a trade is made.
Fund dealing is free, but all others come in at £11.50, which isn’t exactly cheap.
This provider is a good option for more active traders.
Fidelity
This provider has an 0.35 per cent annual service fee for an investment portfolio valued under £7,500 (the fee is capped at £45 if you don’t have a regular savings plan).
It costs £10 to buy and sell holdings, while regular transactions, including dividend reinvestment, costs £1.50 each time.
Fidelity is definitely not the cheapest, but the platform offers a raft of information, top fund lists, and ideas for investors who want some guidance.
Hargreaves Lansdown
Like Fidelity, Hargreaves Lansdown’s platform is simple to navigate and provides plenty of information, including a recommended fund list.
Admin fees for its Stocks and Shares Isa are 0.45 per cent for the year, though shares and investment trusts are capped at £45. While fund dealing is free, buying or selling shares, investment trusts, corporate bonds, and ETFs will set you back £11.95 per trade, which, again, isn’t cheap – though the cost drops after 10 trades per month.
The platform gives you the option of automatically reinvesting income from funds, but note that this comes with a one per cent charge of the trade value.
Also watch out for the £25 transfer-out fee.
While Hargreaves is ideal for people who want a helping hand, you’ll have to weigh this up with the higher costs.
Interactive Investor
This platform has an admin fee of £22.50 per quarter, but this money is returned to you in the form of trading credits. The platform charges £10 to buy or sell funds, shares, investment trusts or exchange-trade funds. So if you bought two funds, you would have £2.50 left to work with.
Monthly reinvestment costs £1, making this a winner for frequent traders. And with the provider ditching its transfer-out fee last year, you can switch at no cost if you decide that it isn’t right for you.
This is by no means an exhaustive list of platforms, but it should give you an idea of the range of options available in the market.