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Fidelity slashes UK tracker fee to 0.1%

Fidelity has reduced the annual charge on its UK index tracker fund to 0.1 per cent from 0.5 per cent and says investors in trackers could save a total of 55m by switching.

The total expense ratio for the Moneybuilder index fund falls from 0.7 per cent to 0.3 per cent, which Fidelity says is the lowest in the market.

The fund company’s research shows that 16 fund groups are charging 1 per cent or more on UK tracker funds with a combined value of 4.6bn, making up over one-third of the 12.3bn invested in UK trackers. It says seven UK tracker funds with a combined value of 346m still have front-end charges of up to 5.5 per cent.

UK managing director Richard Wastcoat says: “Too many are overpaying for their funds, in some cases by 10 times as much. Index products are commodity products and should be brought primarily on price.

“There is no reason for fund companies to charge upward of 1 per cent on these funds, let alone levy an initial charge as well.”

Legal & General runs the UK’s biggest tracker fund, which has a 0.5 per cent annual charge. Spokesman Mike Connolly says: “We believe that we offer a broader range of tracker funds than Fidelity and there are no plans to lower our charges.”

Virgin Money charges 1 per cent on its tracker. Spokesman John Franklin says: “We have seen what Fidelity are offering but we look at it as a loss-leader from their point of view.

“Our customers are very happy with the charges we are offering and there are no plans to drop our charges.”

Wastcoat says: “This is a competitive offer and while there are different dynamics for different businesses, we are certainly not running it as a loss-leader. We are trying to broaden the savings market.”

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