Why fractions of a percent matter
Fees are the mirror image of returns: they compound too, silently, every single year. A portfolio growing at 5% after inflation but paying 1.5% in charges keeps 3.5% — and over 30 years that difference turns £100,000 into roughly £280,000 instead of £430,000. A third of the outcome, gone, without a single bad investment decision. Most people scrutinise a £30 delivery charge and never look at the four-figure annual drag inside their pension.
The three layers of cost
1. The fund’s ongoing charge (OCF). What the fund manager takes each year, deducted invisibly inside the fund price. Global index trackers cost 0.1–0.25%; typical actively managed funds charge 0.75–1.5% and, as the index fund guide covers, mostly underperform anyway. This is the easiest cost to cut and the most valuable.
2. The platform fee. What the broker charges for holding your ISA, SIPP or general account. Two models:
- Percentage platforms charge, say, 0.25–0.45% of everything you hold. Painless when your pot is small — £25 a year on £10,000 — but the same tariff on £400,000 is £1,000+ a year for exactly the same service.
- Flat-fee platforms charge a fixed amount (roughly £100–£250 a year) regardless of size.
The crossover typically arrives somewhere between £30,000 and £100,000 depending on tariffs and caps — the fee impact calculator finds yours from your platform’s actual figures. Below it, percentage platforms are cheap and convenient; above it, flat-fee wins by an ever-growing margin. Many percentage platforms cap the fee for exchange-traded holdings (ETFs, shares) but not for funds — the same index exposure can cost wildly different amounts depending on which vehicle you hold it in.
3. Trading and incidental costs. Dealing charges (£0–£12 per trade), foreign-exchange fees on overseas shares (often 0.5–1.5% — genuinely expensive), fund entry/exit spreads, and interest skimmed on uninvested cash. Individually small; they punish tinkering, which is one more argument for not tinkering.
How to audit what you’re actually paying
- Find your OCFs. Every fund publishes one on its factsheet or KIID. Write down each holding’s charge.
- Find your platform tariff — the fee page, including any caps and the dealing charges you actually incur.
- Add them up in pounds, not percent. “0.45% + 0.87%” sounds like noise; “£2,600 a year” concentrates the mind.
- Check old pensions especially. Workplace schemes from the 2000s and earlier can carry charges of 1%+ for mediocre defaults — a common and expensive form of inertia (see the SIPP and consolidation guide).
A reasonable all-in target for a long-term portfolio — platform plus funds — is under 0.4% a year, and under 0.25% is achievable at scale with a flat-fee platform and cheap trackers.
Switching is worth more than it feels
Moving platform is admin, not risk: use the formal transfer process (in-specie where possible, so you stay invested) and ISA/pension wrappers keep their tax status intact — never withdraw to move, as the ISA guide explains. A tedious afternoon of forms that saves 0.5% a year on £200,000 pays £1,000 a year, every year, tax-free and risk-free. There is no investment decision available to you with a better guaranteed return.
The one-line summary
Know your all-in cost in pounds, hold cheap trackers on a cheaply-priced platform (flat-fee once the pot is large), and treat every 0.1% saved as what it is: guaranteed extra return, compounding for decades.
Related guides & tools
- Low-cost index fund investing — the cheapest OCFs belong to the funds that also perform best
- ISA investing — moving to a cheaper platform without losing the wrapper
- SIPPs and consolidating old pensions — where the worst legacy charges usually hide
- Workplace pensions — the default-fund charge worth checking once
- Investment Fee Impact Calculator — put your own charges in: what they cost over decades at any growth rate, and the flat-fee vs percentage crossover for your pot
- Financial Planner — see what your pot compounds to at different cost levels
Last reviewed: July 2026.