Confidence in retail investing is on the up, with the value of funds in UK stocks and shares ISAs increasing by £209bn in the last decade, according to analysis from investment platform Lightyear.
The amount stashed away in stocks and shares ISAs and Personal Equity plans rose from around £222bn in 2012/13 to almost £430bn in 2022/23 — a 94% increase.
Even when the £222bn is adjusted for inflation, this shows an above-inflation increase of just under a third (28%), suggesting that Brits are putting more into the stock market to make their money work harder.
Despite this increase in investment, research from Lightyear and Capital Economics finds that investors could still be losing millions of pounds each year in unnecessary account fees, limiting the growth potential of their portfolios.
Just under 8 million people hold stocks and shares ISAs in the UK, with Capital Economics calculating that the average annual account fee, across the entire market, is £67. This amounts to upwards of £522m lost to fees in 2022/23, even when adjusted for the small proportion of accounts that pay no fee.
The long-term impact of this is substantive. The research finds that investors will pay almost 10 times more over 25 years in account, transaction, and currency fees based on the average market Stocks and Shares ISA provider, when compared to Lightyear.
A typical Stocks and Shares ISA user – contributing £7,355 (the HMRC average) split across 3 GBP ETFs and 6 US stocks purchases each year, with an assumed 5% annual growth rate – pays £6,513 in fees over 25 years with the average ISA provider. They’d pay just £670 with Lightyear, for the exact same activity.
Thanks to the snowball effect of this money lost in fees, as well as the returns that money could have earned had it remained invested, retail investors could see their portfolios being £11,400 worse off when using mainstream market Stocks and Shares platforms.
Wander Rutgers, UK CEO of Lightyear, said: “With the new ISA year beginning, more and more retail investors will be searching for products that can deliver them the greatest possible returns. But enticing introductory ISA offers often distract retail investors from the underlying fees that eat away at their portfolio in the long term, and line the pockets of banks and platforms — rather than investors themselves.
“It’s crucial retail investors acknowledge the impact of fees in the long term when considering where to deposit their hard-earned savings, and shop around to find transparent platforms which offer the best value for money in years to come.”
