loveMONEY reader question: is the fee on my Virgin Money tracker fund too high?

A reader wants to know whether they’re paying too much in fees for their index tracker fund. We asked Laith Khalaf of Hargreaves Lansdown to help out.

A loveMONEY reader, who asked to remain anonymous, had the following query on index tracker fees:

“Some years ago I decided to invest in a stocks and shares ISA and have my account with Virgin – FTSE All Share Tracker fund charging 1%.

“Over the years I have tried to identify how much is taken in fees but I never get a clear explanation. I have a letter from Virgin earlier this year, which gives their explanation of the fee that I cannot understand.

“I normally save in cash ISAs but hold this Stocks and Shares ISA from several years ago.

“I keep wondering if I should move it but am unclear where to move it to as I know nothing about investing and only invested in the Virgin ISA because it had a good write up in the Daily Mail at the time, and tracking the FTSE and required no monitoring from me.

“The fund seems to have grown, but I am conscious that because it has a 1% annual charge some comments I have read (and most recently in your article) suggest this is a bad fund.

“Can you tell me if there are similar funds to the Virgin all share tracker that offers a better management fee and how I go about transferring?

“Hoping you can assist.”

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Help from an investment analyst

As we can’t offer financial advice, we asked Laith Khalaf, analyst at investment firm Hargreaves Lansdown (pictured), for his opinion on the fees being charged.

Here’s what Laith had to say to our reader:

“You are absolutely right to focus on the charges levied by Virgin, because their tracker fund is now significantly more expensive than several others on the market.

“Fund charges are a particularly big consideration when it comes to selecting tracker funds because it is a key determinant of the returns you get.

“There are plenty of tracker funds around at lower cost than Virgin. For instance, the Legal & General UK Index fund, which charges just 0.1% per annum.

“You will have to buy your chosen tracker fund from an ISA provider however which will charge an annual fee of somewhere between 0.2% and 0.5%, but even so you make a large saving on the fee you are paying now. I

“It may not sound like a lot but saving 0.5% a year really adds up over time, as your pot grows bigger and bigger.

“Switching your ISA is pretty straightforward. First choose which tracker fund, and ISA provider, you wish to use. Then send them an application to transfer your Virgin ISA across. They should take care of the rest. Simples!"

What Virgin Money had to say

Given the relatively hefty fees charged by Virgin, and because our reader found its fees unclear, we asked the firm for their views on our reader issue.

Scott Mowbray, director of external communications at Virgin Money, had this to say:

“We offer our customers access to the FTSE All Share Index at any level of investment and a straightforward and transparent approach to investing. No hidden fees just a single ongoing charge of 1% on our tracker funds.”

Invest in a Stocks & Shares ISA with just £50 a month

If you have a financial question or issue you’d like us to put to the experts, please do get in touch. It needn’t be about investing: whether it’s an energy bill or housing complaint that needs sorting, our team will do their best to help out.