Legal & General is charging a 2% annual management fee on its UK stock market fund, despite it being...
Legal & General is charging a 2% annual management fee on its UK stock market fund, despite it being a passively-managed portfolio that tracks the FTSE 100.
The fund, launched in 1993, initially charged the high fee because it contained a money-back guarantee.
This meant if the FTSE 100 had fallen over five years from the initial purchase date, the investor would receive a refund cheque for the difference at that five-year point. The refund would also cover charges, so the investor would receive a cheque for the whole fall, even if they retained the units.
However, in July 1998, L&G closed the money-back guarantee to new investors as it felt it was unfeasible to continue the offer. Once it sees out the remainder of the units sold with these guarantees, in July next year, it will look to rationalise the fund.
Steve Leach, PR manager, savings and investments, said L&G has stopped marketing the fund but, as a unit trust, it cannot legally be closed to new investment. Any investor who buys the fund without the guarantee will be are charged a 2% annual fee.
'They will, however, be refunded 5% after five years if they hold the fund for that long,' Leach said. 'Effectively they are being charged 1% per year.'