Investment Fees Explained UK 2026/27 — OCF, Platform, Dealing & Hidden Costs

Why fees are the single most important number

Over 30 years, a 1% fee gap on a £20,000 portfolio compounding at 6% costs you roughly £45,000 in terminal wealth. Fees are the only variable in investing you can control precisely — the market's return isn't up to you, but your annual fee burden is. Understanding the layers is worth every hour spent.

The four fee layers

1. Fund/ETF OCF — what the fund manager charges annually.
2. Platform fee — what your ISA/SIPP provider charges for holding your investments.
3. Dealing charges — cost per trade for buying or selling.
4. Hidden costs — bid-ask spreads, FX charges, dilution levies.

1. OCF (Ongoing Charge Figure)

The OCF (or TER — Total Expense Ratio, same thing) is the annual percentage the fund manager takes from your holding. Deducted daily from the fund's NAV.

You never write a cheque for the OCF — it's silently deducted. That's why it goes unnoticed by many investors despite being the biggest fee for most portfolios.

2. Platform fee

Your ISA or SIPP provider charges to hold your investments. Three UK models:

• Percentage fee (tiered): Hargreaves Lansdown, AJ Bell, Vanguard Investor. Charge X% of your holding annually, tiered down at higher balances.
• Percentage fee (capped): HL caps custody on shares/ETFs at £45/year regardless of balance.
• Flat monthly fee: Interactive Investor (~£5.99–£12.99/month). Scales well as pot grows.
• Zero platform fee: InvestEngine on DIY ETF portfolios. Trading 212. Both make revenue from other sources (Trading 212 from FX, InvestEngine from Managed portfolios).

3. Dealing charges

• Fund dealing: Usually free at UK platforms. HL, AJ Bell, ii all offer free fund trades.
• ETF/share dealing: Varies. HL £11.95, AJ Bell £5, ii free trades on their plans, InvestEngine 0%, Trading 212 0% (with FX on non-GBP).
• Regular investing discounts: Most platforms discount monthly-standing-order trades — HL £1.50 vs £11.95, AJ Bell £1.50 vs £5.

4. Hidden costs

• Bid-ask spread on ETFs: 0.05–0.20% per trade. Small but real. Doesn't apply to funds.
• FX charges: Trading 212 charges 0.15% on non-GBP trades. Freetrade charges 0.99% at the free tier. Adds up if you hold non-GBP-priced ETFs.
• Dilution levies: Some UK funds charge a small entry/exit fee (typically 0.05%–0.10%) to protect long-term holders from short-term traders. Uncommon on mainstream trackers.
• Stamp Duty Reserve Tax: 0.5% on UK share purchases (not ETFs). Doesn't apply to most passive investing.

Real UK cost example

£20,000 all in Vanguard FTSE All-World across three platforms:

Same investment. Different total costs. Over 30 years, this gap compounds materially.

How to minimise fees

• Pick a broad-market tracker with an OCF under 0.25%.
• Match your portfolio to a platform's fee structure — ETFs on ETF-focused platforms, funds where funds are cheap.
• Use regular monthly investing discounts.
• Avoid frequent trading — every trade adds spread and (sometimes) dealing costs.
• Stick to GBP-priced shares/ETFs if the platform charges FX.

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Frequently asked questions

What's a reasonable total investment cost?

For a passive DIY UK investor, under 0.5% all-in is achievable. Under 0.3% is possible on InvestEngine + broad-market ETFs. Anything over 1% deserves scrutiny.

Is OCF the same as TER?

Effectively yes. OCF is the modern UK term; TER (Total Expense Ratio) is older. Both are the annual percentage the fund manager takes.

Do I pay fees when the market falls?

Yes — fees are calculated on your holding value, not on gains. In a bad year, fees still get deducted.

What's the cheapest UK investment platform?

For DIY ETF portfolios, InvestEngine at 0% platform fee. For Vanguard-only holdings, Vanguard Investor at 0.15% capped. For larger pots (£100k+), Interactive Investor's flat fee often wins.

Can I claim fees against tax?

No, UK investment fees inside an ISA or SIPP aren't tax-deductible. They're already inside a tax wrapper.