MONEY COMMENT
The UK's Cheapest Index Trackers

By Cliff D'Arcy
September 10, 2003

Yesterday, we wrote about Twenty Terrible Trackers, revealing the index-tracking funds with the highest charges. As index trackers are passive funds, largely managed by computers instead of expensive fund managers, their charges should be very low. The twenty funds we rejected all failed to meet one or more of these search criteria:

• No initial charge
• No exit charges (withdrawal penalties)
• Total expense ratios (TERs) of less than 0.75%. On top of annual management charges, many funds also have administration and other charges outlined in their Key Features Documents.

A number of Fools have asked us to produce a list of the cheapest UK index trackers, and we're happy to oblige. A search of  various databases threw up nine index trackers that meet all three of the above criteria. All these funds can be held inside a tax-free ISA wrapper, which keeps the taxman at bay. Here they are:

(Please note that this list is by no means exhaustive, and it's quite possible that I may have missed a few bargain trackers. If so, email any omissions to me using the link at the top of the page.)

FTSE 100 Trackers

Fund Group        TER   Min p.m.   Min. initial/subsequent lump sum
Abbey National    0.35%    £1                   £1/£1
Liontrust         0.41%   £50               £1,000/£1,000*
Prudential        0.5%    £50                 £500/£250
* also has a 0.6% bid-offer spread, plus a 0.5% initial fee for ISA investments.

FTSE All-Share Trackers

Fund Group        TER   Min. p.m.  Min. initial/subsequent lump sum
M&G               0.49%   £10                 £500/£100
HSBC              0.5%    £20                 £500/£100
Legal & General   0.53%   £25                 £500/£100
Gartmore          0.62%   £50               £1,000/£250
Allianz Dresdner  0.68%   £25(£200)           £500(£1000)*
Fidelity          0.71%   £50                 £500/£250


*the two figures in brackets are the minimum ISA payments for Allianz Dresdner.

When the Fool decided to provide our audience with index trackers, we picked out Legal & General. Its tracker isn't the absolute cheapest on the market, but we chose L&G as our partner because of its low charges, together with its great reputation for customer service and administration. We've been happy with our partnership so far, and we've no plans to switch! Apply here.

More: Learn about Index trackers and ISAs.