Lloyds to cut fund fees but some investors face long wait

Lloyds Banking Group is cutting investment fees after a value assessment revealed its Scottish Widows and Halifax-badged funds were too expensive, but some investors will have to wait until 2032 to see any benefit. 

The group plans to slash fees on its range of 81 funds under the Scottish Widows Halifax brands, creating savings for 634,000 investors, or 95% of its investment customer base. 

However, some investors won’t benefit from the average 0.4% fee cut for more than decade, as those for the Halifax funds will only be implemented on the 20th anniversary of investors’ original investment. Eventually around 94% of the 342,000 customers invested in the Halifax funds are expected to benefit from the move, first reported by The Sunday Times.

The Halifax cuts will apply to 19 funds sold by financial advisers in branches of Halifax and Bank of Scotland between 2001 and 2012 with higher charges, where a portion of the charge was paid to the adviser as commission. Commission payments to financial advisers were banned by new rules from the City regulator in 2012.

The board of the Halifax funds said in the value assessment report that 20 years was ‘a reasonable timeframe for the costs of the regulated advice given at the point of investment to have been recovered’.

Scottish Widows, which has not confirmed a timescale for its cuts, is reducing charges for 313,000 investment customers in its funds’ older share class to bring them in line with newer, cheaper share classes, as well as implementing a simpler pricing structure. 

It is also planning an average 0.4 percentage point cut on 62 funds which will create a saving for 97% of its customers and the ‘small remaining proportion of customers are already invested in our cheaper share classes’.

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Scottish Widows funds were sold by regulated in-house advisers in branches of Lloyds and TSB but a spokesman for the banking group said most of the financial advisers’ commission was paid upfront, meaning fund fee cuts will be implemented sooner. 

‘We’re committed to ensuring all funds and share classes are priced consistently across the different investment styles we provide,’ said the Scottish Widows report. 

Scottish Widows also looked at ‘additional fund expenses’ as part of the value assessment and said ‘increasing efficiency by automating more of our processes will allow us to pass on savings to our customers by halving the charges for registration services from 0.1% to 0.05%’.

Lloyds was forced to make sweeping changes to its fees after falling short in its annual value assessment, introduced by the Financial Conduct Authority this year to force fund managers to prove they are offering value for money.

It requires fund management groups to assess whether charges are reasonable in relation to costs and performance, and the quality of the service provided.

Both the Scottish Widows and Halifax reports noted that Aberdeen Asset Management, the former manager of many of the funds, had been replaced by Schroders. 

In the foreword for both reports, Sophie Connor, chair of the boards of both the Halifax and Scottish Widows funds, said the groups provided ‘good overall value’ and were ‘driven by a clear purpose of delivering success for our customers and, just as importantly, treating them fairly and honestly’. 



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