Vanguard charges discrepancy

BoyJohn811

Hi all, I was wondering if someone could advise me on Vanguard charges. I am trying to help out someone figure out his investment charges, but my knowledge is very limited. He has two different investment pots, invested roughly at the same time with roughly about the same value. Investment 1 contains: Lifestrategy 80% and FTSE global all cap index accum (~50%-50% split), whereas investment 2 contains: Lifestrategy 60% only. I looked it up and it appears all of these have 0.22% charge. However, investment pot 2 has ~£123 charge, whereas investment pot only ~£6.4.

I am aware that the 2nd pot has lost from its value over time, but this I assume would further decrease the charge as the 0.22% would be a smaller amount.

I attach an image of the funds. 

Am I calculating or understanding something completely incorrectly? Thank you very much and sorry for the novice question.

Prism

There are two charges.

The fund management charge, which can be around 0.22% as you mention, is taken automatically from within the funds. You don't see this as a cash value but it reduces the overal returns of those funds slightly over time. The screenshots above do not represent this fee.

Then you have the platform fee. Assuming these funds are held with Vanguard directly, that is a cash value worth 0.15% of the total of all of the funds you hold on their platform. That is likely what this is. The fee is taken from any spare cash in either pot, or via direct debit. I can't explain why the fee has been split on this fashion but there is no guarantee that it is equal. On this amount the fee should be about £75 per year.

BoyJohn811

Thank you very much Prism, yes, the funds are with Vanguard. This would explain it, although I am not sure why the split is not even. I will check the documents, perhaps they sent something that shows this. I did not think of this possibility, much appreciated.

Albermarle

BoyJohn811 said:

Thank you very much Prism, yes, the funds are with Vanguard. This would explain it, although I am not sure why the split is not even. I will check the documents, perhaps they sent something that shows this. I did not think of this possibility, much appreciated.

Although it is correct that the actual fund charges are not visible, the platform charges as shown seem rather odd, so maybe best to give them a call to clarify.

MX5huggy

I think if you don’t have enough cash in your account and not set up a DD to pay fees then they sell some of your biggest investment to cover fees. So which is biggest would change over time. 

eskbanker

MX5huggy said:

I think if you don’t have enough cash in your account and not set up a DD to pay fees then they sell some of your biggest investment to cover fees. So which is biggest would change over time. 

....but both pots quoted by OP show "Investments sold £0.00" over the period, so that wouldn't appear to be the cause of the charging differential.

BoyJohn811

Thanks for the comments.

I believe I might have found the reason for this discrepancy. One account is an ISA, the other is a general savings account (the one where most of the charges can be seen). I found this on Vanguard's site: 'Keep a small amount of cash in a General Account and the fees will be taken from the cash in there.' So, it appears that if there is no DD set up for charges, Vanguard automatically charges the general savings account instead of touching ISA accounts. That is why one of the two accounts shows very little charge, that one is ISA. 

I hope this helps others as well

Swipe

BoyJohn811 said:

Thanks for the comments.

I believe I might have found the reason for this discrepancy. One account is an ISA, the other is a general savings account (the one where most of the charges can be seen). I found this on Vanguard's site: 'Keep a small amount of cash in a General Account and the fees will be taken from the cash in there.' So, it appears that if there is no DD set up for charges, Vanguard automatically charges the general savings account instead of touching ISA accounts. That is why one of the two accounts shows very little charge, that one is ISA. 

I hope this helps others as well

Yep, you always want to pay the charges from your GIA if you have no DD set up to fully maximise your ISA

eskbanker

BoyJohn811 said:

I believe I might have found the reason for this discrepancy. One account is an ISA, the other is a general savings account (the one where most of the charges can be seen).

That does beg the question of the presentation in the original image - it would seem unusual and misleading to combine data from two separate accounts (one wrapped, the other not) without making it clear that this is what's being represented, and the amounts labelled as "cash paid in" both exceed the annual ISA contribution allowance?

jimjames

Swipe said:

BoyJohn811 said:

Thanks for the comments.

I believe I might have found the reason for this discrepancy. One account is an ISA, the other is a general savings account (the one where most of the charges can be seen). I found this on Vanguard's site: 'Keep a small amount of cash in a General Account and the fees will be taken from the cash in there.' So, it appears that if there is no DD set up for charges, Vanguard automatically charges the general savings account instead of touching ISA accounts. That is why one of the two accounts shows very little charge, that one is ISA. 

I hope this helps others as well

Yep, you always want to pay the charges from your GIA if you have no DD set up to fully maximise your ISA

And the opposite for pensions, why pay from taxed income when you can pay with tax relief!

jimjames

BoyJohn811 said:

Thanks for the comments. I believe I might have found the reason for this discrepancy.
I hope this helps others as well

Were the funds invested at exactly the same time? Charges will be based on how long the investments have been held so if not fully owned for the whole quarter then you'll only be charged a proportion of the fee for that time based on the number of days.