Last checked at 12 Dec 2023 13:33
12 December 2023
AJ Bell plc
Price reductions and increases to cash interest rates
At its annual results last week, AJ Bell plc ("AJ Bell" or the "Company") stated its intention to continue with its philosophy of sharing economies of scale with customers as it grows. Today the Company confirms a significant package of pricing changes it has been working on for some time that will benefit its customers by around £14 million per annum. These changes were factored into the financial guidance the Company provided at its annual results last week.
The FCA's guidance to the industry on retention of interest earned on cash has provided clarification on the expectations of firms in this area. Fair value should be assessed in the context of the overall costs and service provided to customers and should be understood by consumers in line with the Consumer Duty. In that regard, platforms' use of cross subsidies can reduce core platform charges and deliver significant benefits to retail customers where firms believe it is right to do so.
Michael Summersgill, Chief Executive at AJ Bell, comments:
"Our philosophy has always been to share our economies of scale with customers as we grow - an approach that is very much aligned with the Consumer Duty. We announced £5 million of price reductions for our customers last year and have increased our interest rates on cash balances several times as base rate has increased.
"We have been planning these latest pricing changes for some time. Now we have clarity from the regulator, we are pleased to confirm another significant package of pricing changes which will benefit our customers to the tune of £14m a year. It is clear platforms are able to use cross subsidies where they do so to deliver fair value to customers across their entire proposition. So, as well as improving the competitive rates of interest we pay, we are also reducing our dealing charges for D2C customers and reducing the custody charges advised customers pay.
"The financial impact is fully factored into the guidance we provided in our annual results last week and our enhanced competitive position puts us in a great place to continue to grow our market share."
The full detail of the pricing changes is provided below.
Pricing changes
With effect from 1 April 2024, AJ Bell is making several price reductions for customers investing via its platform in the Direct-to-Consumer (D2C) and Advised markets, alongside increases to the interest rates paid on cash held by AJ Bell's D2C customers.
D2C platform (AJ Bell)
Trading fees
The costs customers pay to buy and sell exchange traded investments (Shares, ETFs, Investment Trusts and Bonds) via the AJ Bell D2C platform are being reduced from £9.95 to £5.00 per trade. The dealing charges for frequent traders* will reduce from £4.95 to £3.50 per trade.
Cash interest rates
Cash held on the AJ Bell D2C platform is readily available for customers to invest or withdraw and in most cases represents a short-term position while customers wait for investment opportunities. This can differ for pensions, particularly where customers are approaching or in retirement, as they will often hold larger cash balances to fund short to medium term income withdrawals.
AJ Bell is therefore introducing higher rates of interest on cash held in pension drawdown, ranging from 3.45% for balances below £10,000 to 4.45% for balances over £100,000.
It is also introducing higher rates of interest paid on large cash balances held in both ISAs and pensions in accumulation of 2.70% and 3.95% respectively. A full table of the new interest rates is provided below.
Interest rates paid on cash via the AJ Bell D2C platform - the rates in bold text are new and come into effect on 1 April 2024:
ISA | SIPP (accumulation) | SIPP (drawdown) | ||||||
First £10,000 | £10,000 to £100,000 | £100,000+ | First £10,000 | £10,000 to £100,000 | £100,000+ | First £10,000 | £10,000 to £100,000 | £100,000+ |
1.95% | 2.45% | 2.70% | 3.2% | 3.70% | 3.95% | 3.45% | 3.95% | 4.45% |
AJ Bell does not apply its annual platform custody charge to cash balances.
Advised platform (AJ Bell Investcentre)
Annual custody charges
A number of reductions are being made to the annual custody fees for investing via the Funds and Shares Service (F&SS):
· A new tier from £0.5m to £1.0m is being introduced with a lower annual charge of 0.175% (currently 0.20%) | |||
· The annual charge for assets between £1.5m and £2.0m is being reduced to 0.075% (currently 0.10%) | |||
· The annual charge is now capped for all accounts with assets over £2.0m | |||
Charge tier | Current charges | Reduced charges from 1 April 2024 |
|
| |||
Assets up to £500k | 0.20% | 0.20% |
|
Assets from £500k to £1m | 0.20% | 0.175% |
|
Assets from £1m to £1.5m | 0.15% | 0.15% |
|
Assets from £1.5m to £2m | 0.10% | 0.075% |
|
Assets over £2m | 0.00% to 0.025% | 0.00% |
|
The reduction in the custody charge adds further value for advised clients in achieving a very competitive overall net outcome when considering the impact of interest paid on typically smaller cash balances and the custody charges applied to other assets. AJ Bell Investcentre does not apply its custody charge to cash.
Fixed charges
In addition to the above, two fixed charges are being removed:
· SIPP in-specie transfer-in charge (currently £60 + VAT)
· Conversion of a SIPP into a Retirement Investment Account (currently £75 + VAT)
*Defined as a customer that places 10 or more trades in the preceding month.
Contacts:
AJ Bell
· Shaun Yates, Investor Relations Director +44 (0) 7522 235 898
· Tom Selby, Director of Public Policy +44 (0) 7702 858 234