Hargreaves defends charging £2 a month for tracker funds

Hargreaves Lansdown plans to charge investors who hold certain tracker funds on its Vantage platform a flat fee of up to £2 per month, compared to the current annual rate of 0.5%.

The flat fees will be introduced from 31 December. Some investors have complained the switch will make certain index tracker funds more expensive than costlier managed funds.

Where a fund currently attracts a fee of 0.5% a year in the ISA and SIPP, the platform fee will be £2 per month, per holding, and apply to the Vantage ISA, SIPP and Fund & Share Account.

A platform fee of £1 or £2 will also apply to a small number of funds for which Hargreaves currently do not make a charge, such as the HSBC FTSE All Share Index.

The Fund & Share Account had been free but the new platform fee will apply to these funds when held in the Vantage ISA, Junior ISA, SIPP and Fund & Share Account. All other types of investments will remain free.

Danny Cox, head of advice at Hargreaves, said the changes were necessary to increase the range of funds the firm offers and to keep its charges competitive.

He said: "This fee will only apply to a minority of funds - it will remain free to hold over 2,400 funds - 97.3% of the funds our clients hold - in the Vantage Service.

"These changes are designed to help us continue in our aim of providing our clients with the widest range of investments, and the best value, of any investment supermarket in the UK."

Where applicable, charges for shares, investment trusts, ETFs, bonds and gilts will remain unchanged, he said.