Vanguard UK cuts fees on index tracker funds and ETFs

Vanguard UK will be cutting the costs on 25 of its tracker mutual funds, exchange-traded funds, and LifeStrategy balanced funds, effective September 1, 2014.  These price reductions follow similar recent cost reductions by Fidelity. (For average cost comparison between tracker funds and etfs, see figure to right, click to enlarge).

The table below documents these expense fee changes:

Tracker funds
Fund Old ongoing charge New ongoing charge
Vanguard FTSE U.K. Equity Index Fund 0.15% 0.08%
Vanguard FTSE U.K. Equity Income Index Fund 0.25% 0.22%
Vanguard FTSE U.K. All Share Index Unit Trust 0.15% 0.08%
Vanguard FTSE Developed World ex-U.K. Equity Index Fund 0.30% 0.15%
Vanguard FTSE Developed Europe ex-U.K. Equity Index Fund 0.25% 0.12%
Vanguard U.S. Equity Fund 0.20% 0.10%
Vanguard SRI Global Stock Fund 0.40% 0.35%
Vanguard Global Small-Cap Index Fund 0.40% 0.38%
Vanguard SRI European Stock Fund 0.35% 0.30%
Vanguard Emerging Markets Stock Index Fund 0.40% 0.27%
Vanguard Japan Stock Index Fund 0.30% 0.23%
Vanguard Pacific Ex-Japan Stock Index Fund 0.30% 0.23%
Vanguard U.K. Investment Grade Bond Index Fund 0.20% 0.15%
Vanguard U.K. Short Term Inv. Grade Bond Index Fund 0.20% 0.15%
Vanguard Global Bond Index Fund 0.20% 0.15%
Vanguard Global Short-Term Bond Index Fund 0.20% 0.15%
Exchange-traded funds
Fund Old ongoing charge New ongoing charge
Vanguard S&P 500 UCITS ETF 0.09% 0.07%
Vanguard FTSE 100 UCITS ETF 0.10% 0.09%
Vanguard FTSE Developed Europe UCITS ETF 0.15% 0.12%
Vanguard FTSE Emerging Markets UCITS ETF 0.29% 0.25%
LifeStrategy fund range
Fund Old ongoing charge New ongoing charge
Vanguard LifeStrategy 20 % Equity Fund 0.29% 0.24%
Vanguard LifeStrategy 40 % Equity Fund 0.29% 0.24%
Vanguard LifeStrategy 60 % Equity Fund 0.29% 0.24%
Vanguard LifeStrategy 80 % Equity Fund 0.29% 0.24%
Vanguard LifeStrategy 100 % Equity Fund 0.29% 0.24%

Transaction fees

The Vanguard funds also charge an upfront transaction fee, known as a Pre-Set Dilution Levy (PDL), on the funds, which covers stamp tax and transaction fees incurred by investment transactions. These fees are paid into the fund. Recent changes in the stamp tax levy has reduced or eliminated  this charge on eleven funds.

Fund Current PDL New PDL, effective from 1 July 2014
Vanguard Global Enhanced Equity Fund 0.10% Zero
Vanguard U.K. Long Duration Gilt Index Fund 0.10% Zero
Vanguard U.K. Inflation-Linked Gilt Index Fund 0.10% Zero
Vanguard U.K. Investment Grade Bond Index Fund 0.75% 0.50%
Vanguard U.K. Short-Term Investment Grade Bond Index Fund 0.50% 0.30%
Vanguard Euro Investment Grade Bond Index Fund 0.40% 0.30%
Vanguard LifeStrategy 20% Equity Fund 0.18% 0.10%
Vanguard LifeStrategy 40% Equity Fund 0.17% 0.10%
Vanguard LifeStrategy 60% Equity Fund 0.17% 0.10%
Vanguard LifeStrategy 80% Equity Fund 0.17% 0.10%
Vanguard LifeStrategy 100% Equity Fund 0.16% 0.10%

Platform costs

UK investors usually buy tracker index funds and exchange-traded funds with  a “fund supermarket” platform provided by a discount brokerage firm; or in the case of a pension plan or individual savings account, a  “wrap account”.  These platforms have their own cost structure.

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Blog:Vanguard UK cuts fees on index tracker funds and ETFs