One of the biggest advantages of investing in ETFs (exchange-traded funds) is their low cost. But how do ETF fees work — and what charges should you look out for?
In this guide, we break down the two main costs associated with ETF investing: Total Expense Ratios (TERs) and platform fees.
We’ll explain what each charge means, how to compare providers, and how keeping costs low can help you grow your money more efficiently over time.
What is an ETF?
Usually, ETFs are investment funds that track an index, like the FTSE 100 or S&P 500. They’re traded on stock exchanges just like shares and are designed to give investors an easy, low-cost way to invest in a diversified portfolio.
Because most ETFs are passively managed, their fees are typically much lower than actively managed funds. This makes them popular with long-term investors who want to minimise costs and maximise returns.
What is a TER (Total Expense Ratio)?
The TER is the annual charge taken by the ETF provider to cover the cost of running the fund. It’s shown as a percentage and is automatically deducted from the fund’s performance — so you won’t see it leave your account directly.
TERs usually cover things like:
- Fund management and administration
- Custody and legal fees
- Auditing and compliance
How much is a typical TER?
It depends on the type of ETF:
- Core index trackers (like the FTSE 100 or MSCI World) usually range from 0.07% to 0.20%
- Thematic or specialist ETFs (like AI, biotech, or clean energy) may range from 0.30% to 0.75% or more
Example:
If you invest £10,000 in an ETF with a TER of 0.15%, the annual cost is £15. That charge is taken automatically by the fund — you don’t need to do anything.
What are platform fees?
Platform fees are what investment providers charge for hosting and managing your investments. These fees are separate from the ETF fees.
Platform fees can include:
- Account or admin fees – charged annually (usually as a percentage of your portfolio, e.g. 0.25%–0.45%)
- Trading fees – charged when you buy or sell an ETF
- Withdrawal or transfer charges – sometimes charged when moving money out
Example:
If you invest £10,000 on a platform that charges a 0.25% platform fee, that’s £25 a year, on top of the TER for your ETF.
Some providers charge flat fees, while others use percentage-based models. Either way, it’s important to understand the total cost of ownership, because these fees can add up over time.
Why ETF fees matter: the compounding effect
Even small differences in costs can have a big impact on your long-term returns.
Let’s say two investors each invest a lump sum of £20,000 for 20 years and achieve the same average annual return (10%). One investor pays 0.40% in combined fees and the other pays just 0.10%.
Over the 20 year period, that small difference in fees could cost more than £3,000 in lost returns.*
That’s why keeping costs low isn’t just good practice, it’s a key part of smart investing.
*Assumes a fixed annual return throughout, in practice this will likely vary. Calculations are estimates provided for illustrative purposes only.
How to compare ETF fees
When choosing where and how to invest, always consider:
- The ETF’s Total Expense Ratio (TER)
- The platform’s annual or monthly fee
- Trading or dealing fees, especially if you invest regularly
- Any withdrawal, transfer or inactivity fees
Some platforms also charge more for tax wrappers like ISAs or SIPPs, so check for hidden charges.
InvestEngine keeps your costs low
At InvestEngine, we believe in giving investors more of their returns, not less. That’s why we offer:
✅ No platform or dealing fees (DIY portfolios)
You won’t pay any annual charges or commissions when buying or selling ETFs (underlying ETF costs apply).
✅ Access to over 750 low-cost ETFs
We offer a wide range of funds from trusted providers like Vanguard, Xtrackers, and Invesco.
See exactly what you’re invested in with our Portfolio Look-through feature and rebalance with one click as your portfolio grows.
✅ Savings Plans and AutoInvest
Fully automate your investing to keep your cash working without lifting a finger.
The only costs are the ETF charges themselves (TERs) — which are clearly displayed and deducted within the fund.
Final thoughts
The cost of investing in ETFs may seem small, but it can make a big difference to your long-term wealth.
By understanding Total Expense Ratios (TERs) and platform fees, you’ll be in a stronger position to compare providers and choose a cost-effective way to invest.
At InvestEngine, we keep costs low so you keep more of your returns — simple as that.
Important information
Capital at risk. The value of your portfolio with InvestEngine can go down as well as up and you may get back less than you invest. ETF costs also apply.
This communication is provided for general information only and should not be construed as advice. If in doubt you may wish to consult a professional adviser for guidance.
Tax treatment depends on personal circumstances and is subject to change, and past performance is not a reliable indicator of future returns.