What charges are included in illustrations?

In line with regulatory requirements, the illustration will consider several types of charges and use assumptions to show their potential impact on investor returns.

Custody charge

This is a charge of 0.25% p.a. for holding the investments. It is calculated on daily balances and deducted monthly in arrears from the cash in your portfolio.

Management charge

This is a charge of 0.35% p.a., for managing the investments. It is calculated on daily balances and deducted monthly in arrears from the cash in your portfolio.

Underlying fund fees

These are the ongoing charges levied by the funds in this portfolio, if applicable. They will vary depending on the portfolio and are supplied by the managers of the funds.

Product charge (SIPPs only)

This is £75 plus VAT per year.

Dealing and transaction charges

Examples of these are:

A dealing charge of 0.10% for dealing investment trusts
PTM (Panel of Takeover and Mergers) levy applied when buying or selling shares with a total value of over £10,000
Stamp duty of 0.5% on UK shares subject to Stamp Duty Reserve Tax
Transaction costs incurred by funds in the portfolio, if applicable, when buying and selling assets in the fund (assumed, based on historic activity). The impact of these costs is reflected in the fund net asset value.

Retained interest

There is no retained interest.

Incidental charges

Incidental charges are expenses a fund or investment trust might incur in addition to management charges (which are disclosed in the underlying fund fees). They include, for instance, fund performance fees.

A note on illustrations for portfolios including investment trusts

The rules for producing illustrations require providers to show the impact of incidental charges. For portfolios including investment trusts, this can in our view lead to overstating the impact of charges, and not providing an accurate reflection of what an investor might experience.

For instance, an illustration would have to show the negative impact of an investment trust’s performance fee (based on historic performance fees) as part of the incidental charges, but not the enhanced performance that triggered the fee.

There is widespread debate about whether treating fees and expenses incurred by an investment company (e.g. investment trusts) as incidental fees is appropriate. The FCA has acknowledged that “for a minority of investment products, the required costs and charges disclosure may not result in representative cost information being published”.