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Double hit for Xmas as L&G fund charge to rise by 50%

Legal & General is set to hit investors in its £1bn fixed-interest fund with a double whammy this December when it hikes its income-deducted annual management charge by 50 per cent.

It is warning IFAs it is raising the charge to 0.75 per cent from 0.5 per cent in a bid to cover the cost of running the actively managed fund, which it says has been priced in line with an index tracker. As L&G takes charges from income rather than investors&#39 underlying capital, it means the fund&#39s yield will also be hit, falling to 4.23 per cent from 4.48 per cent under current levels.

The company says the fund will still be within the Cat-standard price framework it champions but IFAs argue that it is effectively forcing investors to pay higher charges for less income. L&G says it can no longer afford to maintain the fund&#39s performance under the existing charging structure. It is the eighth-best performing bond fund over three years.

Head of investment sales (discount houses) Marie Banfield says: “It has become impossible to continue running the trust on this basis due to the active fund management and research required to meet the trust&#39s objective.”

Hargreaves Lansdown senior analyst Meera Patel says: “It is not good news for investors by any means because they will be paying more for less income but the fund&#39s charge is still relatively low.”

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