Vanguard ISA at a glance
With plenty of options for UK residents to save and invest tax-efficiently, it can be hard to find the right platform to use. So, we’ve created this Vanguard Stocks and Shares ISA review to give you an insight into what this particular company can offer.
The Vanguard ISA presents an affordable way to invest in a vast range of index funds, ETFs (exchange-traded funds), and blended funds.
Looking at the competition, Vanguard’s ISA offering stands out because of:
- Low platform costs and cheap ongoing fund charges.
- The ability to directly invest in a range of Vanguard operated index funds and ETFs.
- A simple platform that’s easy to understand.
Want to know more about the Vanguard S&S ISA? To ensure you completely understand this account, throughout this Vanguard ISA review, we’ll explain everything you need to know. This will include all the fees involved, how it compares against competitors, and the steps you need to take to transfer your ISA.
What is a stocks and shares ISA?
A stocks & shares ISA, also known as an investment ISA, is a tax-efficient investment account. This type of tax-efficient investment account is available to adult UK residents.
Each tax year, you get a £20,000 allowance that can be used for saving and investing with your ISA account. If you like, you can use this whole amount for your stocks and shares ISA, but keep in mind that the allowance can change yearly.
The main benefit of using a stocks and shares ISA is that for most investments held within the tax wrapper, you don’t have to pay dividend or capital gains (CGT) tax on any income or growth. This allows your portfolio to grow and compound over the years without being held back by a tax burden.
Another significant benefit is that when you want to withdraw funds from your ISA, unlike with a pension, any money you take out doesn’t count towards your income for that year – meaning you pay no additional tax on your funds down the line.
Vanguard ISA at a glance
|🗺️ Supported Countries||UK|
|💰 Investing Fees||£0 (just ongoing fund charges)|
|💰Platform Fee||0.15% per year (based on value of your holdings, an additional 0.3% for a managed ISA)|
|🎮 Demo Account||No|
|📈 Portfolio Rebalancing||Yes (with managed ISA)|
|💵 Minimum deposit||£500 (or £100 per month)|
|📍Investment Instruments||Index funds (equities and bonds), passive ETFs, managed funds, blended funds|
Types of Vanguard ISA accounts
There are three types of ISA accounts available with Vanguard:
- Stocks and shares ISA account: this is for adults over 18 based in the UK and you can invest up to £20,000 into this type of ISA during the tax year.
- Junior ISA (JISA) account: allows you to invest on behalf of someone under 18. You can invest up to £9,000 each tax year, which doesn’t count towards your annual allowance. The child can only access the account once they turn 18.
- Managed ISA account: this is a new product from Vanguard and allows you to get expert investment advice and a managed ISA investment portfolio. All for a relatively low management fee of 0.3% (plus the standard 0.15% platform fee and fund costs).
How it works
The sign-up process is relatively straightforward. If you head to the Vanguard UK homepage and navigate to the ‘ISA’ page you will be able to hit the ‘open an account’ button. During the registration process, it’s best to have:
- Your national insurance (NI) number.
- Current address.
- A debit card or bank details to set up a direct debit payment.
It doesn’t cost you anything to open up a Vanguard account. Keep in mind there is an annual platform fee of 0.15% (based on your holdings) and the minimum deposit is a £500 lump sum or a £100/month direct debit.
So, you’re able to open up an ISA account quite easily. Just keep in mind that you can only open and pay into one stocks and shares ISA account each tax year.
Vanguard ISA fees
The costs and fees for the Vanguard ISA are very competitive and straightforward. Here’s a table with everything laid out so that you can review the costs and fees yourself:
|Vanguard ISA Fee||Cost|
|Annual platform fee||0.15%|
|Managed ISA fee||0.3% (plus 0.15% fund fee)|
|Fund charges||Ongoing costs ranging from 0.01% – 0.89%|
|ETF costs||One off charge ranging from 0.03% – 0.45%|
|ETF Live Price Quote and Deal||£7.50 per trade|
|FX (foreign exchange) fee||None|
Here’s a bit more detail on how the fees work:
- Annual platform fee – this covers Vanguard’s costs of running the platform. The 0.15% charge is based on your total account holdings (including any cash). It’s an annual charge that’s calculated daily based on your total portfolio and then charged quarterly. It’s capped at £375, which is what you’ll be charged once your portfolio reaches £250,000.
- Managed ISA fee – this additional cost of 0.3% is on top of the 0.15%, so you might as well think of it as a total fee of 0.45%. Vanguard deducts it as a single account fee of 0.45% rather than two separate cost transactions and it’s billed in the same way as the platform fee. The total for this is capped at £1,125 (which also means a £250,000 portfolio).
- Fund fee – for the managed ISA, there’s an additional fund management charge of 0.15% which is Vanguard’s charge for managing the fund you select. With the regular stocks and shares ISA, the ongoing charges figure (OCF) for funds ranges between 0.01% to 0.89%.
Pros and cons of the Vanguard ISA
Here’s a quick summary of the main advantages and disadvantages of the Vanguard investment ISA:
- No monthly fee, just a flat annual charge of 0.15% which is billed quarterly and automatically deducted from your holdings.
- Ability to directly invest in index funds and ETFs with one of the world’s biggest asset managers.
- No cost to buy or sell funds and no FX conversion charge.
- The option to have a managed portfolio for a relatively small fee.
- Decent selection of investment choices available, including individual funds, and blended funds.
- It’s not highly advertised but you can receive interest on idle cash balances.
- Straightforward website that’s easy to navigate and control your portfolio.
- A simple option for a beginner investing wanting to invest in funds.
- It’s a flexible ISA.
- You’re only able to invest in Vanguard products.
- You can’t buy individual stocks and shares.
- The annual percentage fee is good for smaller portfolios but can be more expensive than a flat fee structure as your wealth grows (but capped at £31.25 per month) .
- There’s no mobile app for investing or managing your portfolio.
- If you want to buy ETFs at the live price there’s a fee.
- Minimum investment of £500 (or £100 per month).
How it compares with other ISA providers
Throughout this Vanguard S&S ISA review, we’ve run you through most of the key benefits and downsides, but let’s take a look at how the Vanguard platform and its fees stack up against alternative ISA providers:
|Fees||Vanguard||Freetrade||AJ Bell||Hargreaves Lansdown||Interactive Brokers||iWeb||Barclays||InvestEngine (Managed)||Interactive Investor||Moneybox||Nutmeg||Natwest||Halifax|
|Minimum investment||£500 or £100/month||£2||£500 or £25/month||£100 or £25/month||£1||£1||£50||£100||£1 (or no tradings fees with £25/month min)||£1||£500||£50||£2,000 or £100/month|
|Platform fees||0.15%/year (plus 0.3% for managed ISA)||£4.99/month||0.25%/year (max £3.50/month)||0.45%/year||£3/month (or free if your trade fees are more)||£100 (one-off fee)||£4/month min (or 0.2% funds + 0.1% other investments) – capped at £125/month||0.25%||£9.99/month||£1/month (plus 0.45%/month)||0.75% up to £100k then 0.35% after (for the fixed allocation portfolio it’s 0.45% up to £100k and 0.25% beyond)||0.15%||£3/month|
|Share dealing fees||£0 (only funds available, no individual stocks and shares)||£0||£1.5 for funds/£9.95 for stocks and shares||£0 for funds/£11.95 for stocks and shares (reducing to £8.95 and £5.95 with more trades)||£3 UK shares/€3 European shares/from $0.005 US shares||£5||£3 funds/£6 other investments + £1 transaction charge||£0||£5.99 (you get 1 free trade a month, and some international shares cost £19.99)||£0 (just ongoing fund costs of 0.12% – 0.58% depending on choice and 0% for US stocks)||0.21% – 0.3% average fund cost (plus 0.07%averaged spread)||0.07% maximum (plus maximum ongoing charge of 0.4%)||£9.50 for UK trades & funds (£0 for international trading and £2 for scheduled regular investments)|
|Foreign exchange fees (FX)||None||0.45%||0.75% (reducing to 0.5% and 0.25% for large trades)||1% (reducing to 0.75%/0.5%/0.25% for large trades)||0.03%||1.5%||1% (reducing to 0.75%/0.5%/0.25%/0.1% for large trades)||None||1.5% (reducing to 1.25%/1%/0.5%/0.25% for large trades)||0.45%||None||None||1.25%|
Transfer a stocks and shares ISA to Vanguard
It is possible to transfer your existing ISA over to Vanguard. You’ll first need to set up an account before you can transfer your ISA.
In the ‘overview’ section of your account, there will be an option to ‘transfer an account’. You’ll need the details for your existing ISA account, your national insurance (NI) number, and also details of the investments held in your current ISA.
You’ll need to fill in the transfer request form on Vanguard with all your details. Once you’ve done this, they will contact your existing stocks and shares ISA provider to initiate a transfer. Your existing provider has to let you transfer out if you choose to, but it can take up to 30 calendar days. There’s no charge for an ISA transfer, but not all providers will be supported.
You can only carry out an ‘in specie’ transfer of Vanguard funds held elsewhere. These funds can be transferred directly as units or shares. Any securities or assets in your existing stocks and shares ISA that are not supported on the Vanguard platform will be sold by your provider and the value will be transferred over as cash and reinvested at your instruction.
Always make sure that you use the official Vanguard ISA transfer service. Don’t withdraw everything from your current provider and move it yourself because you could lose the tax protection you’ve built up over time.
How safe is the Vanguard ISA?
Vanguard is regulated by the FCA (Financial Conduct Authority), and is covered by the Financial Services Compensation Scheme (FSCS), which protects up to £85,000 of your deposits.
On top of this, Vanguard is the second-largest asset manager in the world (by the size of total AUM). So your money is being invested through a global investment leader.
How to pick the right stocks and shares ISA
Finding the right ISA for you depends on what you’re looking for and how regularly you invest. Here are some things to look out for and questions to ask yourself when you’re trying to find the best stocks and shares ISA:
- Does the platform offer commission-free trading in the UK, and how cheap are the platform and share dealing fees?
- Is there a discount for frequent investors?
- What is the investment choice like?
- How easy is it to use the platform, is there a mobile app?
- Do you have to pick all the investments, or are there ready-made portfolios?
- Is there a cheap FX fee if you plan on buying international shares?
- How reputable is the provider?
- Does the platform offer good customer service?
- Are there any incentives like free stocks or cashback for joining?
The truth is, there’s no single ‘best’ ISA provider. It’s all about finding the one that fits your needs as an investor. Many platforms structure costs and fees differently. So some will work out cheaper for you depending on what you invest in and how frequently.
As mentioned, you can open and pay into one stocks and shares ISA each tax year. So, if you try one out for a while and don’t like it or find it expensive for your needs, you can always transfer to another platform down the line.
The bottom line – is the Vanguard ISA a good choice?
The Vanguard stocks and shares ISA is a no-frills option for investing into index funds and ETFs. It may not be for everyone because you’re limited to Vanguard products, but it’s hard to beat for value and simplicity.
To sum it up, Vanguard’s ISA offering stands out because of:
- Low ongoing platform fee, no charge to buy or sell funds, and one of the cheapest ways to invest in index funds and ETFs.
- Offers cheap managed investment portfolios.
- A competitive rate of interest paid on idle cash balances.
- Great starting platform for beginner investors who want to keep things simple.
It’s one of the cheapest ISA platforms available to UK investors, but the investment choice is limited compared to some other ISA providers. With the new addition of managed portfolios, the Vanguard investment ISA sits somewhere between a DIY platform and a robo-advisor. It also boasts one of the most established brand names in the world of investing.
This can be either a DIY investment ISA or managed ISA. So, you’ll get the choice of managing your portfolio yourself, or letting the Vanguard experts control things for an additional fee. Vanguard also offers the option to carry out an ISA transfer for you, so if you’re looking to change providers or find a cheaper platform, this will make moving much more effortless.
Hopefully, this review of the Vanguard ISA has given you some insight into what it can offer you as an investor. Let us know how you get on in the comments and what you think of this account.
Is the Vanguard stocks and shares ISA good?
It is for some investors, especially beginners. However, whether it’s the right ISA for you will depend on your goals and investing strategy.
What is the Vanguard ISA interest rate?
Your rate of return will depend on the investments you hold in the ISA. For cash balances, interest paid tends to reflect the current Bank of England base rate (minus fees).
Is Vanguard good for beginners?
Yes! It’s a simple platform to use, and because you can only invest in funds and ETFs, it keeps things straightforward to grasp. However, more advanced investors may not like the lack of investment choices or trading tools.