John Lewis has launched a range of savings accounts aimed at ethical investors in partnership with digital wealth manager Nutmeg.
The new range includes a stocks and shares Isa, Junior stocks and shares Isa and general investment account, which invest in funds that have high environmental, social, and governance (ESG) standards.
Here, Which? looks at what John Lewis is offering, and how the charges compare to other investment platforms.
Why is John Lewis offering savings accounts?
John Lewis says it has chosen to launch its ethical investment products after a survey it conducted of 2,000 UK adults revealed the coronavirus pandemic had made 52% of people reassess how they spend and save, and 72% said they’d consider saving into a stocks and shares Isa rather than into a current account.
- Find out more: most sustainable savings providers
How do the John Lewis investments work?
You’ll be able to save up to £20,000 tax-free per tax year in a stocks and shares Isa. If you’ve used up your Isa allowance you can then open a general investment account, which is subject to tax.
Junior Isas have a yearly allowance of £9,000, which parents and guardians can make regular contributions to each tax year for children under the age of 16, which the child can access when they turn 18.
John Lewis will charge you based on the amount you invest. You’ll be charged 0.75% on any investments up to £100,000, and 0.35% beyond that.
The retailer says it will invest the money in a range of portfolios, once you choose a timeframe for investing (we suggest a minimum of five years to lock away your cash) and level of risk that suits your needs.
Money will be invested with companies that score highly for their carbon emissions, climate change, renewable energy, social impact and ethical practices.
You can open a new account or transfer funds from another provider, and change plans and our level of risk at any time from any device.
How does John Lewis compare?
John Lewis’s investment products are ‘robo-advisers’ – online investment services which typically ask you questions about your attitude to risk, allocate you to a suitable basket of investments, and manage them on your behalf.
Robo-advisors suit those who aren’t necessarily experienced investors, and who don’t want to pay for a financial adviser. The Financial Conduct Authority (FCA) says advisers charge an average of 2.4% of the amount invested for initial advice and 0.8% a year for ongoing advice (1.9% p.a with underlying product and portfolio charges factored in).
Charges are one of the most important things to consider when comparing investment platforms.
We’ve put together a table of charges below for the biggest robo-advice platforms in the UK. Generally, you’ll pay two charges: an annual charge to the provider which covers things like administration, and investment costs which can vary. Some providers also charge based on how much you have in your pot, like John Lewis.
|Evestor||0.48% to 0.50% based on a choice of three portfolios|
|MoneyBox||0.57% to 1.03% based on funds chosen|
|John Lewis||0.75% on the first £100,000, 0.35% on investments over £100,000 plus average investment fund cost of 0.29% and 0.08% market spread.|
|Wealthsimple||0.9% on the first £100,000; 0.7% on investments of over £100,000 to £500,000 to, investments over £500,000 free|
|Nutmeg||0.72% to 1.05% based on a choice of four portfolios|
|Barclays||1.39% to 1.59% depending on chosen portfolios|
As you can see, charges can vary based on the investment decisions you make. John Lewis isn’t the-cheapest robo-advice platform in our analysis, but its prices are reasonable.
However, cheap doesn’t always mean good value for money. you’ll need to make sure that the platform suits your needs and aligns with your values. If you’re keen to invest in socially responsible funds, John Lewis could suit you as could other platforms which offer ethical portfolios.
It’s also worth mentioning that traditional investment platforms can mimic robo-advice offers, but at a lower cost. For example, Vanguard – a Which? Recommended Provider – charges 0.15%, and you can choose a ready-made portfolio. If you’re an experienced investor you’ll also have the choice of choosing your own funds. If you want to invest in shares, Vanguard may not be for you as it only offers access to its own funds.
Alternatively, if you have a lot of money to invest – you could be better off choosing a fixed-fee provider such as Halifax Share Dealing or Interactive Investor which charge £36 per year (plus £9.50 per trade) and £9.99 for its basic plan (plus one free trade per month and £7.99 after that) respectively no matter how much is in your pot.
- Find out more: we’ve analysed the best investment platforms for 2021, which could help you make a decision on where to park your cash.
What is ESG investing?
ESG investing is a type of sustainable investing that measures how companies perform in three categories: environmental, social, and governance. It allows you to grow your savings without compromising on your values. As with all investing, it involves risks.
Supporters of ESG investing claim that the extra analysis involved means you end up with better-managed companies.
Remember that each company may have its own formula to measure ESG scores, but we’ve outlined what they could factor in below.
- Find out more: what is ethical investing?
New to investing? Check out our guides
Investing your money for the first time is a big step.
We’ve got lots of guides that can help you on your journey:
If you can afford to, it could be worth getting a financial adviser so you don’t end up with something unsuitable.
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