investment trust


My entry to the world of investment trusts, nearly 25 years ago now, was via monthly savings schemes. They made it both easy and cost-effective to invest small sums. But few such schemes exist today and they may soon die out completely.


At various times, I used savings schemes with Henderson, RIT Capital Partners, Fleming, and Finsbury. Purchase charges were typically 0.5% so when stamp duty was added as well, you could buy £50 of shares for just £1.

It didn’t take long to build up some meaningful positions and, perhaps more importantly, it removed the temptation of trying to time the market.

‘it removed the temptation of trying to time the market’

You couldn’t trade online in those days. When I did want to buy an individual share, I had to sneak out of the office, carrying my brick of a mobile, and phone a broker from the comfort of the car park. Savings schemes were much simpler.

Baillie Gifford throws in the towel


Things look very different today.

The latest firm to call time on its savings scheme is Baillie Gifford. 21,000 investors, collectively holding £1.3bn, are to be transferred to Hargreaves Lansdown.

The cost of purchasing trusts through this particular monthly scheme was nil, although charges were made for sales and for holding them in an ISA. These cost levels will be preserved for three years and then everyone will move to the main Hargreaves Lansdown fee structure.

I see that DIY Investor (UK) has been caught up in this, as he has been using the platform to invest for his grandchildren.

It’s disappointing that Baillie Gifford has gone down this route. You could make a strong case for them leading the industry both in terms of performance and low costs. But if they can’t make the numbers stack up for schemes like this then I suspect no one can.

In most cases, when these schemes are transferred, it seems that you move on the charging structure of the new platform more or less immediately. The three-year cost freeze that Baillie Gifford has negotiated seems like a pretty good concession. It gives folks a decent amount of time to see what else is on offer.

Hargreaves and Alliance are sweeping up


This isn’t the first savings scheme that the mighty Hargreaves has taken on. It’s also taken on clients from BlackRock, Witan, JPMorgan, and RIT Capital Partners, to name just a few.

I was one of those transferred when it took over the RIT savings scheme in 2015. Having long since stopped putting in monthly amounts, it had little effect on me and the switch seem to be handled very smoothly. Although, as just one investment trust was involved, I suspect the administration aspects were relatively simple.

Alliance Trust, itself recently swallowed up by Interactive Investor, seems to be the other company taking on homeless savings schemes. It runs them for Allianz, Artemis, Dunedin, Edinburgh Partners, and Martin Currie.


Who still offers savings schemes?


The ever-useful AIC website has information on which companies still offer savings schemes.

It lists 16 firms that offer either an ISA, investment scheme, children’s investment scheme or Junior ISA.

However, a number of those listed are run by Alliance Trust and come with its standard £10 a month admin fee and £9.99 purchase charge. Others seem to be in the process of closing down and no longer accept new customers.

Ignoring Fidelity, which owns its own platform anyway, this is who seems to be left:


IT Inv 1505


As you can see, it’s pretty slim pickings.

BMO’s £8 purchase charge is pretty much the same as a normal share dealing platform, effectively leaving Aberdeen Standard as the last man standing when it comes to the big investment trust firms.


Does it really matter?


Of course, my fondness for these schemes is heavily driven by nostalgia.

Looking back, it wasn’t all plain sailing. I held these investments outside of an ISA, so I had to keep track of each monthly purchase for CGT purposes. And up until 2008, there was the added complication of adding a separate indexation allowance for each monthly purchase. Yeurgh!

What’s more, when I did sell one of my holdings, electing to receive a cheque for the proceeds, it got intercepted and cashed in by a ne’er-do-well. Thankfully, the matter was resolved with the minimum of fuss and a replacement cheque was sent out.

‘Of course, my fondness for these schemes is heavily driven by nostalgia’

These days, most brokers offer regular investment plans, allowing you to buy a range of shares, ETFs and investment trusts for around £1.50/£2. You are no longer tied to just one investment house and you can shelter everything in a single ISA.

Some of these have annual administration charges as well, so choosing an alternative low-cost provider can be tricky. At the moment, from a somewhat cursory review, Hargreaves Lansdown at £1.50 to purchase and Halifax at £2 look like the best value to me, as they don’t charge for investment trusts held outside of an ISA. iWeb (which, like Halifax, is owned by Lloyds Banking Group) is £5 to buy or sell but comes with a £25 account opening charge.

However, if you think you might end up with a larger sum invested several years down the line then sheltering your money in an ISA probably makes sense. It’s difficult to be specific about how big ‘a larger sum’ is, but anyone investing £250 or more a month probably falls into that camp. Maybe even as low as £100.


Optionality rules


All that said, I do worry that those new to the investing world don’t have this option any longer. Although you can use an online broker, the vast array of investment options that opens up can be somewhat overwhelming.

And with the world of online trading shrinking to a few major players, it’s become clear that most of them want to concentrate on frequent traders that can generate them lots of commission. Quarterly admin charges are commonplace these days and this can be offputting for those just starting out with a few hundred pounds to invest.

Of course, new methods of trading like the Freetrade App and Santander’s Digital Investment Advisor might turn out to be the savings schemes of tomorrow.

And for most of the population, a passive investing strategy, perhaps with something like a Vanguard Life Strategy fund, is usually more than adequate.

Still, I can’t help feeling a little sad at the impending demise of the humble savings scheme.

Note that I may own some of the investments mentioned in this article. You can see my current holdings on my portfolio page. Nothing in this article should be regarded as a buy or sell recommendation as this site is not authorised to give financial advice and I’m just a person writing a blog. Always do your own research!


investment trust


First published in November 2022

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