Commission-free share investing platform Freetrade will launch a self-invested personal pension in December this year, This is Money can reveal.
App-based service, Freetrade, which is popular among millennials, saw its customer base almost double throughout 2020 off the back of its no share-dealing fees pricing.
The Sipp will be available to new and existing customers, but while share, investment trust and ETF dealing is free it will charge a flat fee of £9.99 per month.
Freetrade was founded in 2015 by Adam Dodds (pictured) and launched its app in 2018
Users will be able to consolidate multiple pension pots and deal instantly across a wide range of shares, ETFs and investment trusts, but unlike with big name DIY investing platform rivals they will not be able to hold funds.
However, investors can have multiple Sipps that they actively invest in, unlike with stocks and shares Isas, with which they can only pay new money into one each tax year.
The company also launched its premium service, Freetrade Plus, this week which will cost £9.99 per month and give access to more stock options and order types.
For Freetrade Plus customers, the Sipp will cost a discounted rate of £7 per month in addition to the premium membership rate.
What is Freetrade?
Freetrade is an app based commission-free investing platform that was launched in 2015 and now boasts more than 225,000 customers.
Investors can access over 2,700 securities, including stocks, ETFs, investment trusts, and exchange-traded commodities which continues to expand on a weekly basis.
Its basic investment account is free while an Isa is £3 per month. Its Plus account is £9.99 per month and offers the Isa for free.
All users can make instant commission-free trades during market opening hours and are charged 0.45 per cent over the spot FX rate.
According to its own research, 22 per cent of its Isa customers transferred from Hargreaves Lansdown, 7.2 per cent from Interactive Investor and 6 per cent from Vanguard.
Freetrade is authorised by the Financial Conduct Authority, is part of the Financial Services Compensation Scheme, and is a member of the London Stock Exchange.
Freetrade has unveiled its new Sipp offering to challenge incumbents who charge dealing fees for buying and selling shares and capture some of the growing personal pensions market.
In the US, commission-free share trading app Robinhood has taken a substantial share of the market, encouraging others to also offer free share-dealing.
Rival services offering no share-dealing charges in the UK include Trading 212 and EToro. Share dealing charges for established DIY investing platforms range from £5 at iWeb, to £7.99 at Interactive Investor, £9.95 at AJ Bell and £11.95 at Hargreaves Lansdown, but all also offer investment funds.
Freetrade also wants to push an ethical angle on investing through its platform. It said its latest venture will allow investors to ‘allocate money to companies and funds with a shared outlook on key environmental and social issues and “to vote with their feet”, when such alignment falls short’.
Adam Dodds, founder and chief executive, said: ‘We’re excited to announce the launch of the Freetrade Sipp.
‘We’re committed to building a platform that helps our customers achieve better long-term financial outcomes, and the Sipp will play a key role in making that vision a reality.
‘We’re proud to launch a Sipp with a simple, flat fee, which offers a wide range of investment choices and hope to play an essential role in our customers’ financial lives for decades to come.’
How does it compare?
Unlike most other investing platforms, Freetrade’s offering is based on the fact that users can make share trades yet pay no commission.
Most other rivals charge share dealing fees, which affect shares, investment trust and ETF purchases and can be £12 per trade. Some offer free fund dealing, however.
Freetrade says it can offer free share dealing as its revenue is generated through a few different streams including its £3 monthly subscription for Isa accounts, spot + 45bps fees on foreign exchange, and a small interest charge on cash balances in customer portfolios.
According to its own research, its Sipp is set to be the cheapest of its kind for those who only hold shares, investment trusts and ETFs.
Over 30 years, for an initial pot of £20,000 and assuming 5 per cent growth per year, Freetrade claims its Sipp could save Hargreaves Lansdown customers up to £9,900, AJ Bell customers up to £6,100 and Interactive Investors up to £7,400.
According to Freetrade, choosing its Sipp over other providers could save you thousands
The graphic above assumes a portfolio in equal amounts of shares, ETFs and trusts and two share deals per month – amounting to 24 a year.
Hargreaves Lansdown caps annual charges on shares in a Sipp at £200 while AJ Bell caps this annual charge at £25 a quarter (£100 a year).
Interactive Investor and iWeb both charge the same commission for transactions in shares or funds – unless you select one of their higher monthly subscription plans, in which case the annual charges would go up.
Freetrade charges a flat 0.45 per cent fee over spot rate on foreign exchnage fees for buying overseas shares, compared to other providers, many of which typically charge between 1 per cent and 1.5 per cent unless transactions are significantly higher.
|Provider||Admin charge||Charges notes||Fund dealing (online)||Standard share, trust, ETF dealing (online)||Regular investing||Dividend reinvestment|
|AJ Bell Youinvest||£0 – £250k: 0.25%£250,000 – £1m: 0.1%
£1m – £2m: 0.05% Over £2m: free
|Capped at £100 for Sipps for shares, ITs and ETFs||£1.50||£9.95 (£4.95 if 10+ trades occurred last month)||1% (min £1.50, max £9.95)||1% (min £1.50, max £9.95)|
|Freetrade||£10 per month for basic users
£7 per month for premium users
|£9.99 monthly membership fee applies for premium users||n/a||Free||Free||n/a|
|Hargreaves Lansdown||£0 – £250k – 0.45%£250k – £1m: 0.25%£1m – £2m: 0.10%
Over £2m free
|0.45% a year (capped at £200) for Shares, ITs, ETFs, and bonds||Free||0 – 9 deals: £11.95
10 -19 deals: £8.95
20 +: £5.95
|£1.50 per stock a month||1% (£1 min, £10 max)|
Investor Plan: £9.99 per month Funds Fan Plan: £13.99 per month Super Investor Plan: £19.99 per month
|Investor Plan: One free trade per month
Funds Fan Plan: Two free trades per month
Super Investor Plan: Two free UK or funds trades per month
|Investor Plan: £7.99
Funds Fan and Super Investor plans: £3.99
|Investor Plan: £7.99
Funds Fan Plan: £7.99 for shares and ETFs, £3.99 for trusts
Super Investor Plan: £3.99
Share investors are on the rise
2020 has seen a rise in private investing directly in shares, with more people working from home and taking an interest in markets due to the pandemic.
This, in turn, saw a large number of new customers across most investing platforms since March, and Freetrade too, recorded record figures for its products and services, especially among those in the ‘millennial’ age range.
Since March, the company has seen a 90 per cent increase in its total number of customers with the biggest portions being made up of those aged 18 to 25 (27 percent of total customers) and 26 to 35 (42 per cent of total customers).
It also reported a 26 per cent increase in order volume between April and July and a spike in June.
There are a number of other trading platforms that operate in the UK similar to Freetrade, such as Revolut and Trading 212 while there are many more in the US.
Their growth in popularity, particularly in the US, has seen rival firms forced to scrap trading commissions.