With just a few days to go until the end of the 2020-21 tax year, many savers have been eyeing stocks and shares Isas – especially since cash Isa interest has continued to nosedive.
Indeed, new figures from Moneyfacts show the average stocks and shares Isa returned 13.55% between March 2020 and March 2021, compared to 1.18% return from the average cash Isa over the same period.
Of course, before investing in a stocks and shares Isa there are two things you’ll need to consider – firstly, whether you’re able to expose your money to the risk involved with making any investment, and secondly, the fees.
While many providers fix their fees, with the Vitality stocks and shares Isa, your fees can be wiped out altogether if you fulfil its terms of having a ‘healthy lifestyle’.
Here, Which? explains how Vitality’s stocks and shares Isa works and other ways to reduce fees and charges when you’re investing.
What does the Vitality stocks and shares Isa offer?
Vitality, which also offers health and life insurance products, offers both funds – where you can pick the level of risk you’re comfortable with – and the opportunity to build your own portfolio.
There are no charges for setting up your Isa, but you’ll need to pay tiered product fees charged for administrating your plan, a fund charge for the management of the fund, and if you take out your plan through a financial adviser you’ll also pay an adviser charge, which is agreed between you and your adviser.
It’s the tiered product fees that you can potentially make savings on by being active, as it depends on whether your ‘Vitality status’ is bronze, silver, gold or platinum.
You can move your status up the tiers by collecting Vitality points, which you receive for things like clocking in at a Vitality gym partner (these include Virgin Active, David Lloyd and Nuffield Health), recording a certain number of steps – but only if you have a fitness tracker that’s synced up to Vitality – and taking annual health checks with Vitality-affiliated providers.
- Find out more: how to find the best stocks and shares Isas
How keeping active can reduce charges
In the first year of your membership, you’ll start at bronze and have to earn points to achieve a higher status. In the following years, you’ll need to earn a certain number of points to keep or exceed that status.
Platinum status requires at least 2,400 points – and, while you can bump up your points with things like a fitness assessment, a lot of it will depend on keeping moving each week. You can earn up to 40 points a week by staying active, where 10,000 steps earns you five points, for example.
When it comes to stocks and shares Isa fees, you’ll pay the most if you have less than £75,000 invested and a bronze Vitality status, with a product charge of 0.45%. Those with a bronze status will only see their product charge reduce to 0% if they invest more than £250,000.
However, you can pay 0% on an investment of less than £75,000 if you reach platinum status and invest in Vitality funds, but you’ll still pay 0.2% on non-Vitality funds.
Other ways to reduce your investing fees
Fees and charges are usually part and parcel of making investments, but there are ways to reduce how much you spend – therefore maximising your returns.
Consolidate your Isas
If you’ve invested your Isa allowance in several stocks and shares Isas over the years, you may find you’ll spend less on fees if you transfer all of your accounts into the same one.
Transfers don’t count as new contributions, so you can transfer your investments from previous years without affecting your current year’s Isa allowance.
The transfer will either be ‘in specie’, where the whole investment is moved to your new provider, or your investments will be sold and the proceeds are sent to your new provider.
- Find out more: stocks and shares Isa transfers
Pick platform fees to suit your investment style
Investment platform fees can have a big effect on your returns if they don’t suit the type of investment you have.
Those with small portfolios of less than £50,000 should opt for platforms with a low percentage-based annual fee and no fixed fees.
However, if you have a larger portfolio then a fixed fee is likely to work out better – simply because a percentage of your holding is likely to be considerably more than someone with a small portfolio.
- Find out more: compare investment platform fees and charges
Don’t trade more than you need to
If you frequently buy or sell investments, be aware of any fees levied on the transaction, which can easily mount up over time and outweigh the benefit of making the trade in the first place.
Some platforms offer a certain number of free trades per month, but anything beyond this will be eating into your returns.