Vanguard UK announced this week that from 31 January 2025 they are introducing a minimum monthly account fee.

Vanguard’s fees used to be a simple 0.15% of what you have invested and this is (and still will be) capped at £375 a year. This made them super cheap for new investors and very reasonable for investors with big pots too particularly as they also have zero dealing fees.

The change they’ve made is to introduce a minimum monthly account fee of £4. Doesn’t sound too bad? Well as we all know fees are critical when investing so Katie has been hard at work updating her Impact of Fees Tool for the Vanguard changes and we are working out what difference it will make for you!

For the full Vanguard Announcement straight from the horse’s mouth read this.

Not got time to read the whole article? Here is the short version:

• If you have over £32,000 invested with Vanguard across all your accounts (ISA and SIPP and general account) it doesn’t affect you at all
• The change doesn’t apply to Junior ISAs for your kids
• If you have a small pot and are a LONG way off getting to £32,000 then it might be worth switching to a different platform until you get to £32,000 total invested

This is the first time Katie and I have seen a fee floor or minimum fee from a company with a percentage charge! This meant that Katie had to go in and add that to the fees tool.

The reason Vanguard have done this is to make the smaller portfolios they manage for people more profitable for them.

They were losing money if you set up a SIPP with them with only £100 in it. The fee you would pay them on an account of this size would be a whopping 15 pence a year!

It costs them WAY more than 15 pence a year to run your account and organise everything. So they have introduced the new minimum and it means that everyone pays at least £4 a month. But remember this fee is is across all account types that you have with Vanguard so look at your combined total across your SIPP, ISA and general account.

From January 2025, the lowest possible fee for having a SIPP, ISA and general account is £48 a year.

I can understand why they have done it but that doesn’t make me any less annoyed as Vanguard used to be the most incredible place to start investing because of its low fees.

The questions is now, should you change to another provider? Does this affect you? Is Vanguard still a good place to invest?

Should you panic at the fee increases and change providers? No, absolutely not. The changes don’t come in until the end of January 2025 and we should be led by maths and logic in investment decisions. Let’s look at whether this affects you or not.

You will see a LOT of adverts coming out from other providers in the next few days and weeks trying to get you to change platform like this one from a new provider in the SIPP world, Monzo.

You should be very cautious moving your money around. Yes, Monzo has lower fees for the example they’ve cherry-picked but it only covers the first year of investing and assumes you don’t invest any more. Over the long run Monzo will cost you a FORTUNE more than Vanguard.

For their comparison, Monzo has also picked the LifeStrategy Vanguard fund which we would avoid at all costs.

The advertisers will use confusing maths and bad examples to persuade you to change to them so please be very aware and do the actual maths before making any big decisions. Watch out for our platform review coming soon.

It is not only fees that matter it is the funds you have access to. Monzo ONLY has target retirement funds and the one with the farthest out retirement date of 40 years away has 30% bonds. This would kill your long term financial future! Watch week 9 of the Rebel Finance School course to understand why this is BAD!

Having reviewed Monzo’s new SIPP I can see no reason why you would EVER use this service, it is costly and has poor fund choice and yet they will try and persuade you they are better than everyone else!

Don’t buy into the marketing hype, do the maths and the research everytime.

If your accounts (ISA, SIPP and general account) all together total more than £32,000 then this change does not affect you at all. Not one little bit! YAY. You can stop reading this update now and go back to chilling, watching a movie or doing press-ups.

Vanguard has also announced that the changes do not affect fees on Junior ISAs so if you have these accounts for your kids then nothing has changed at all! YAY. Go Vanguard for looking after the little ones!

You are just starting out, you don’t have that much to invest and you are way off £32,000 in total. Should you change?

The answer is “it depends!”.

To make it super easy Katie updated the Fees tool today so you can do your own numbers. You know the Donegans believe maths should guide us in investing decisions not emotion! So let’s do the maths.

The challenge with doing the maths is that everyone’s situation is different. If you have £20,000 invested and are putting in a few hundred a month then this change is going to be short lived for you and barely affect your future at all.

If you are starting out and you have nothing invested yet and are adding small amounts like £50 a month then this change will make a difference to you and you should use one of the other platforms until you get to £32,000 invested and then consider coming back to Vanguard.

All the numbers below were worked out on Katie’s Impact of fees tool

Let’s imagine you are starting today. You have nothing invested so far and you are going to invest £50 every month.

This is the type of situation that this new fee is going to impact the most. Using Katie’s Fee tool we can see the impact in the chart to the right.

In this situation you are now £3,834 or 5.8% WORSE off over 30 years from the changes. This is a big change and is mostly made up from lost compounding (the more of your money is taken in fees, the less it’s invested and compounding for you) not the fees themselves.

If this is you and you are just starting out and putting small amounts in then if I were you I would change to another platform. Katie and I are not ready to tell you which platform that would be in our opinion as we haven’t done our full research yet, but we are planning a full platform review to help you make a decision. The changes don’t come in until the end of January 2025 so just breathe and we can figure all this stuff out together.

Let’s say between your ISA and SIPP you have £15,000 invested and you are ploughing your money in regularly and investing £250 a month. What difference do the changes make if you are in this situation?

After 30 years you would be £300 worse off in fees and lost compounding. You’d have £513,489 instead of £513,189. At this point you will be crying into your pot of gold. Katie, and I would say the impact is so small we would not bother changing and consider it as our contribution to Vanguard building the platform for all of us.

Katie and I can’t do the sums on every situation out there and we don’t know your numbers! But you do and you can plug them into Katie’s fee tool to see how much difference it will make in your situation. Click here for Katie’s Fees Tool and put your numbers in now.

All you need to do is put in 2 numbers in the orange box at the top:

1. Initial investment: how much you currently have, combined across your ISA, SIPP and general account.
2. Monthly investment: how much you plan on investing per month

Katie has pre-populated the tool with the fees for investing in the FTSE Global All Cap using the Vanguard UK platform both before (left hand side or “Vanguard NOW”) and after (right hand side or “Vanguard fee change”). If you have chosen the FTSE Developed World ex UK you can change the OCF to 0.14% on BOTH SIDES (the blue and green boxes) so that you’re comparing apples with apples.

If it makes less that £800 difference over £30 years it is really just noise on your portfolio and it probably isn’t worth changing. You are, after all, paying for the service and Vanguard will hopefully use the money to build out the app and keep developing the platform and paying some fees is a good thing! We want Vanguard to be around and working for us well into our retirement!

Whilst this Vanguard fee change will only affect early stage investors, it’s still super annoying to us. Why are the Donegans annoyed when it won’t affect them one bit?

Because we run a course that helps people get started in investing and it is those people that are going to be affected the most by this.

And because a bunch of other providers are swooping in to scoop up smaller investors. Always do the maths, think from a position of knowledge and don’t buy into the marketing hype out there from providers trying to get you to switch from Vanguard.

What should you do about the fee change?

Just starting out and investing small amounts. Change platforms. Look out for a platform update in the coming months that will guide you on which one to choose. Just take a deep breath, take your time and don’t make any quick decisions. A few months of £4 fees isn’t going to affect you a lot but it will probably be worth making a change. Stay tuned and we will help you through it.

Between £10,000 – £25,000 and regularly investing at least £100 a month. This change in fees will probably have a negligible impact on your investing life time. We would suggest ignoring it and keep on investing as quickly as you can to get over the £32,000 mark at which point the fee change doesn’t make a difference! Have a play with the Fees tool to see what the impact on fees over 30 years is likely to be.

One member of the Facebook group saw this as a challenge to go past £32,000 invested as quickly as possible! I loved how he used this update to motivate himself!

Over £32,000 – nothing has changed so carry on investing Captain!

The interesting thing for us is that this change has made us look at the fees on all our accounts and Katie woke up this morning with a realisation that we would be better off amalgamating her ex-Deloitte pension into Vanguard with our other investments as in our case having fewer platforms will save us money! We have been discussing moving all our investments into Vanguard today even though they have annoyed us with this update.

I have emailed Vanguard today to get a comment from them about the fee changes and to tell them that they are being short-sighted as the small investors they are charging more will become big investors over the long run as they keep investing. Who knows what they will reply with but I will keep you up to date over the coming weeks!

Look out for the platform review coming out over the next month or two that will guide you as to which platform to consider using.

What did you discover about your situation from running your numbers through the Fees tool? Leave us a comment below and tell us your thoughts. We are working to make it easy for anyone to do the maths and compare providers and funds.

Sending you huge peace and pineapples (although we never compare the size of these!)

The Donegans

PS As always, this post is intended for educational and information purposes, it is certainly NOT investment advice. You can read our full disclaimer here.