ISA charges
Most cash ISAs do not have any charges, as these are usually
hidden within the interest margin. However, most stocks
and shares components will have two basic charging components:
Initial charges
For collective investments such as unit trusts or OEICs,
this will usually be the standard initial charge on the
fund, typically 5-6% with no extra costs for the ISA management.
However, a growing number of investment groups discount
their standard initial investment charge down to 2% or 3%,
with some waiving them altogether. In such instances, you
should be wary of early encashment penalties that can run
for as long as the first five years of the ISAs life.
Investment trusts that levy an initial charge have to add
VAT as well, though charges investment trust ISAs are often
lower than with other collective investments, with a flat
fee of £30 - £50 not uncommon.
For direct investment ISAS, the initial charge varies widely.
Some brokers make no initial charge, other charge a flat
fee while some still charge a relatively high percentage
of the initial sum invested.
Annual charges
Unit trusts and OEIC annual charges are normally around
1-1.5%, with most having the facility to increase annual
charges at 90 days' notice.
Investment trusts carry their own internal management charges,
which vary according to the age and the size of the trust.
For large general trusts, the annual management costs may
be less than 0.5%. However, most investment trust ISAs levy
an additional charge. Generally this will be around 0.5%
(+VAT) but again, some ISAs carry flat fee annual charges,
which favour larger investors.
Many non-collective investment ISAs are operated on a 1%
(+VAT) annual fee. This is halved for some company sponsored
single share ISAs. To discourage small investments, a minimum
cash fee is frequently applied. Some self-select ISAs charge
no annual fee, but collect charges in other ways.
Other charges
Alongside the two main charges, you may come across the
following:
