Deposit values, transaction activity & growth assumptions used are outlined below
Demonstrating the cost savings of Lightyear’s investor platform
There are two estimates of potential cost savings for UK stocks and shares ISA holders through using Lightyear compared to the average of other providers:
1) Account fees: Estimated that £522 million was paid by UK Stocks and Shares ISA holders on unnecessary account fees in 2022/23.
The average annual account fee paid by Stocks and Shares ISA holders was estimated by taking the weighted average of the top ten providers’ account fees by market share, which are estimated to cover 53% of the market.(1) It is assumed these are representative of the rest of the market. Fees were collated through a detailed web search and market shares were based on a survey of consumers conducted by Lightyear. The weighted average fee was applied to the total value of Stocks and Shares ISAs as reported by HMRC.(2) A 10% adjustment was made to account for the share of market that pays no account fees.
2) Total fees over 25 years: Estimated that UK Stocks and Shares ISA holders will pay almost 10 times more over 25 years in account, transaction and currency fees based on the average market provider compared to Lightyear.
The estimate is based on a typical Stocks and Shares ISA portfolio, with the cumulative fees calculated for a Lightyear customer and a weighted average of the top ten UK investment platform providers (by market share) over a 25 year time horizon. It is assumed these are representative of the rest of the market. Fees were collated through a detailed web search and market shares were based on a survey of consumers conducted by Lightyear.(2) For the purpose of this analysis, three main types of fees are taken into consideration: 1) account fees; 2) transaction fees; and 3) foreign exchange fees. Different fee rates offered based on value were accounted for.
Fees were calculated for ten major UK investor platform providers based on the following exemplar Stocks and Shares ISA portfolio:
- The average annual subscription per account is £7,355 in year one (1), and grows in line with inflation at 2% each year.
- It is assumed that nine transactions are made each year, six of which are US stock purchases and three of which are ETF (GPB) purchases.
- Portfolio growth is 5% a year (in line with the weighted average of the last 25 year performance of the US and UK equity markets).
- USD/GBP exchange rate is 0.80.
25 year cost-savings:
- It is estimated that UK Stocks and Shares ISA holders will pay £6,500 on average in account, transaction and currency fees over a 25 year time period based on the average market provider, vs £670 with Lightyear.
- This means their portfolio will be £11,400 worse off (snowball effect where you lose the money paid in fees, as well as the returns that money would have earned if it'd remained invested) with the average market provider, vs £1,200 worse off with Lightyear. So cost savings with Lightyear are £10,200.
Additional notes:
- Assume that the thresholds for fee rates stay constant, which is a conservative estimate.
- These estimates are in terms of current £ values, and discount factors have not been applied. As this is a comparative analysis, this would be assumed to be the same for all providers.
- Analysis covers 2022/23 to 2047/48 time period
- Fees based on those published on company websites as of 8 January 2025
2. Only providers that offer the direct purchase of shares and ETFs in the US and UK were included.
Note: The quoted figures in this research have been put together by Lightyear, with the broad approach and methodology behind the estimates peer reviewed and validated by Capital Economics. Individual company comparisons have not been verified by Capital Economics.
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Disclaimer
Remember, when investing your capital is at risk. ISA rules apply.
This research has been commissioned by Lightyear from Capital Economics, an independent macroeconomics research consultancy. The views expressed remain those of Capital Economics and are not necessarily shared by Lightyear. While every effort has been made to ensure that the data quoted and used for the research behind this document is reliable, there is no guarantee that it is correct, and Capital Economics Limited and its subsidiaries can accept no liability whatsoever in respect of any errors or omissions. This document is a piece of economic research and is not intended to constitute investment advice, nor to solicit dealing in securities or investments.
