Best ETF platforms in the UK (2024) - Generation Money (2024)

This is our guide to the best ETF platform in the UK.

Exchange Traded Funds (ETFs) are a popular and low-cost way of investing in stocks, commodities and bonds.

Our team of finance experts cover the best ETF platforms for different investment accounts, what an ETF is, why they’re so useful for investing and the costs you’ll typically pay.

Let’s jump in.

Best ETF Platform UK Overall

eToro is our overall top pick and our top pick for best ETF trading platform in the UK.

Best ETF platform UK for a Stocks and Shares ISA

For investing through an ISA, InvestEngine is the best ETF platform in the UK.

Can you buy ETFs within a Stocks & Shares ISA?

Yes, ETFs are permitted investments for Stocks and Shares ISAs.

An investment ISA is a great way to start investing because income and gains generated within them are free from income and capital gains tax.

InvestEngine is the cheapest way to invest in ETFs within a Stocks and Shares ISA. For more on this, read our guide to the cheapest Stocks and Shares ISA.

Best ETF platform UK for a SIPP

Can you buy ETFs within a pension?

You can hold ETFs in both a SIPP (self-invested personal pension) and a SSAS (small self-administered scheme).

Personal pensions, such as a SIPP, are a great way of saving for your retirement. The government will pay you a 25% bonus on contributions into a pension. Higher rate and additional rate taxpayers can also get further tax relief via a self-assessment form.

You can contribute up to £60,000 or your annual income (whichever is lower) each year into your pensions to get these tax benefits. Beyond these amounts, you can still contribute but you won’t get the government’s 25% bonus on contributions, nor can you get further relief as a higher or additional rate taxpayer.

Read our guide to the best SIPP providers for more details.

How we chose the best ETF platforms

Investing your money with the right platform shouldn’t be taken lightly. We have more than 30 years of professional and private investing experience at Generation Money and we’ve extensively tested each of the best ETF platforms in this guide.

The criteria we used to analyse each ETf platform are:

• Safety – each of the providers on our list is FCA regulated and FSCS protected
• Fees & charges
• Range of ETFs
• Customer service and customer feedback
• Ease of use

We put our money where our mouths are and, between us, we have investment accounts with all of the providers on this list.

What is an ETF?

An Exchange Traded Fund (ETF) is a type of collective investment fund.

A collective investment fund is where money from different investors is pooled together into a single investment vehicle. This investment vehicle, or fund, then invests money as a single entity on behalf of all the individual investors.

Generally, a fund can invest in all sorts of assets – shares, bonds, property, commodities and even other funds.

There are a number of benefits to investing via a fund rather than as an individual investor. These include the benefit of professional expertise if the fund is run by investment managers, and diversification if the fund invests in a range of assets or geographies.

One of the primary benefits, though, is in cost. Funds are able to get exposure to a wide range of assets much cheaper than an individual investor can.

Think of an ETF that tracks the FTSE100 index of leading UK companies. If you wanted exposure to the entire index you could buy shares in each constituent company individually. But, this would cost a huge amount in dealing fees.

Instead, you can invest in an ETF that’s designed to track the FTSE100 index. An ETF that does this will invest in the FTSE100 companies in proportion to their weighting within the index – all done for you. You simply buy units in the ETF.

Note that an ETF that tracks an index by buying every investment in it in proportion to their size within that index is called a Fully Replicated ETF.

So, ETFs are a type of fund that’s traded on stock exchanges like individual shares. But, instead of buying ‘shares’ in an ETF you buy units in it. Each unit has a market price that can fluctuate during market hours.

What do ETFs invest in?

Technically, ETFs are a type of Exchange Traded Product (ETP). ETFs typically invest in shares and bonds, but some invest in commodities and others invest in currencies. These are known as ETCs – Exchange Traded Commodities or Exchange Traded Currencies.

For most retail investors, though, we’re concerned with ETFs that invest in shares, bonds and commodities:

Stocks and Shares

Otherwise known as equity, shares are certificates of ownership in a company. Owning shares in a company is sometimes known as ‘owning stock’ – and this is what is referred to when you hear about stock exchanges.

ETFs typically invest in listed shares, which are those available to be traded on public stock exchanges such as the London Stock Exchange.

Many ETFs track a share index, which is a list of certain companies according to a particular theme, size and/or location.

If you’re interested in investing in individual stocks and shares, such as buying Man United shares, check out our guide to the best investment apps in the UK.

Bonds

Bonds are a form of debt issued by large companies and governments around the world. UK government bonds are known as gilts.

When you buy a bond you’re effectively lending money to the company or government that issues it. In return, the issuer pays you interest at a rate decided when the bond is launched. It may be a fixed rate or a variable rate that’s linked to inflation, for example.

Government bonds issued by developed countries, such as the UK and US, are considered to be extremely safe investments. Corporate bonds and bonds issued by the governments of emerging market countries tend to be riskier.

There are lots of ETFs which invest in corporate and government bonds. If you’re looking to invest to receive an income, you may want to invest in bonds.

Commodities

Some ETFs invest in commodities such as gold, silver and oil. Investing in commodities like these can be part of a diversified portfolio of assets. They can also be useful for hedging other investments.

ETFs provide a low cost way of getting exposure to commodities without having to physically own them, saving on storage costs.

For example, some investors prefer investing in gold ETFs rather than physically buying and storing gold.

Sometimes an ETF that invests only in commodities is referred to as an Exchange Traded Commodity (ETC).

Property

Although it’s not so common with ETFs, some invest in commercial property or indices based on property themes.

Funds which invest in property are more commonly associated with Real Estate Investment Trusts (REITs) which, as the name suggests, are investment trusts.

An investment trust is another type of fund that’s also listed on a stock market – but an investment trust is an actual company with a board of directors, unlike an ETF.

Themed ETFs

Some ETFs are set up to invest according to a particular theme, such as Artificial Intelligence (AI) or clean energy.

These ETFs may be riskier and come with higher fees as they often have professional investment managers overseeing them. This is because they’re not simply replicating a well-established stock index such as the FTSE100, which can be done by an algorithm.

Other types of Exchange Traded Products (ETPs)

For most retail investors, you’re probably interested in ETFs which invest in shares or bonds, and that track the better-known stock indices.

There are some more specialist types of ETFs, though, which we outline below.

Exchange Traded Currencies

As the name suggests, an Exchange Traded Currency (ETC) product is a fund which tracks a particular currency or basket of currencies.

Often used as a hedge by both retail and professional traders to offset currency risk, they can be a useful addition to a trading strategy.

ETCs, like other types of Exchange Traded Products (ETPs) can be either physical or synthetic.

Physical ETFs vs Synthetic ETFs

A physical ETF or ETC (Exchange Traded Commodity/Currency) is a fund which buys the underlying assets in proportion to whichever index or benchmark they are seeking to replicate.

The fund actually owns the assets directly. This is the lowest-risk type of ETF as it reduces counterparty risk, which is the risk that another party doesn’t fulfil their side of a trade.

To see this more clearly, we can look at synthetic ETFs. These are ETFs which don’t buy the physical assets underlying their investment strategy.

A synthetic ETF which, for example, tracks the FTSE100 index may only buy derivatives of the shares that make up the index rather than the underlying shares. They do so through an investment bank.

This means that the ETF doesn’t physically own the shares themselves. In the event that the provider (or counterparty) of the derivatives was to go out of business, it’s possible that the ETF would lose its investment.

Synthetic ETFs are more commonly seen in funds which seek to replicate the price of certain commodities which may be difficult to physically buy and store. These include agricultural products such as wheat.

Exchange Traded Notes

One of the highest risk types of ETP, Exchange Traded Notes are derivative contracts issued by investment banks.

Essentially, instead of issuing units in an actual fund, like a typical ETF, an investment bank will issue a type of debt. Instead of paying interest to the investors in that debt, the investment bank will agree to pay a return that tracks a major index, such as the FTSE100.

They’re high risk because the investment bank has no obligation to actually buy the FTSE100 stocks that make up the index. In other words, the ETNs are not backed by any underlying assets.

ETNs should only be traded by sophisticated investors who understand the risks involved.

What is an ETF trading platform?

An ETF broker, or ETF trading platform, is a company that facilitates your ability to trade ETFs.

ETF brokers, like stock brokers, act as the middleman between you and the ETF (there’s often another middleman involved, too – an investment bank).

Think of ETF platforms like a supermarket. The supermarket provides the items on the shelves for you to come in and buy. To get these items onto the shelves, delivery and logistics companies (investment banks) get them to the supermarket. The items themselves are produced by producers (the fund managers).

To be able to offer ETFs to customers, a broker must be licensed and registered with the FCA (in the UK, at least).

ETF platforms will hold your investments on your behalf and you can see their value usually via an app or online trading platform.

Most ETF brokers charge fees – but not all do, as is the case with InvestEngine which is the cheapest way to invest in ETFs, particularly through a Stocks and Shares ISA.

For more on investing through an ISA, read our guide to the best Stocks and Shares ISA for beginners.

ETF trading platform fees

You will have to pay one or more fees to trade ETFs.

No matter which ETF platform you go with, you will have to pay underlying fund charges to the creators of the ETF (the fund’s managers).

We outline the typical fees involved when trading ETFs below.

Platform fees

Brokers tend to charge a platform fee (sometimes called a custody fee) for looking after your investments for you.

Most ETF platforms will express this fee as a percentage of the total value of your holdings with them. Some, such as Interactive Investor, charge a monthly subscription fee.

InvestEngine and eToro do not charge annual platform fees, though. In fact, InvestEngine doesn’t charge any fees for investing in ETFs unless you choose their Managed Portfolios.

ETF trading fees

There are two types of trading fees when it comes to investing in ETFs – dealing fees and market spread.

Dealing fees

If you’re using one of the more traditional investment platforms, such as AJ Bell or Interactive Investor, then you’ll pay dealing fees. These apply each time you buy or sell an ETF.

Note that eToro and InvestEngine do not charge dealing fees.

Spread

Market spread is the difference between the price offered and the price demanded for a particular asset. That’s no different with ETFs.

When assets are traded on stock exchanges, there are small price differences between what a buyer is willing to pay and what the seller is willing to sell for.

The greater the demand to trade in a particular ETF, the smaller the spread tends to be. This is because there are usually lots of market participants willing to buy and sell at any one time for popular ETFs.

Spreads can range from 0.01% to upwards of 0.15% for less frequently traded ETFs. Who usually profits in the differences between buy and sell prices? Investment banks, in their role as market makers.

ETF ongoing charge figure (OCF)

As with all types of fund there’s a fee to cover the costs of running and administering the fund.

This covers costs including salaries of the fund management team, marketing and the fund’s own dealing costs.

Each ETF will have an ongoing charge figure (OCF), sometimes also called Total Expense Ratio (TER), quoted as a percentage. This percentage is annual and is deducted from the investments within the fund.

An ETFs ongoing charge figure can range from 0.04% to upwards of 0.70% depending on the asset class and investment strategy.

FX Fees

If you’re buying an asset, such as an ETF, which is priced in a foreign currency then you may need to pay currency conversion fees.

For example trading in US shares which are priced in US dollars, such as buying Palantir shares.

Larger brokers such as AJ Bell and Interactive Investor can charge 0.75% or more in FX fees. eToro charges 0.50%.

ETF stamp duty

There is no stamp duty payable on ETFs, unlike directly buying shares in the UK.

This is another reason that investing in ETFs that replicate a stock market is cheaper and more efficient than buying the shares individually.

Trading ETFs

If you’re considering using ETFs as part of a trading strategy, such as day trading, then you may be interested in using leverage.

Trading with leverage is high risk and quite often more expensive than you think – especially if you hold the position overnight. But, using leverage can be effective in hedging positions if you are managing a trading portfolio, rather than simply day trading.

There are ETF which have been created specifically to provide a leveraged return of a particular index. These can be long (betting the price goes up) or short (betting the price goes down).

Trading with leverage in the UK usually involves CFDs (contracts for difference). These are derivative contracts entered into with a broker based on the price of an underlying asset. Neither you or the broker owns the underlying asset, although brokers may hedge their positions.

You can read more on this in our eToro review. eToro is our recommended broker for leveraged and CFD trading, so long as you fully understand the risks involved.

Day trading ETFs

ETFs, tracker funds and index funds – what’s the difference?

ETFs are commonly associated with index funds, but not all ETFs are index funds and not all index funds are ETFs.

Index funds are not themselves a type of fund – they’re a strategy. A fund which tracks a specified index can be referred to as an index fund. This is where the name tracker fund comes from too, as index funds track the performance of a specified index.

But, an index fund can be structured either as an ETF or as a mutual fund.

So, an ETF or a mutual fund is the structure through which an index (tracker) fund is created and traded.

Some ETF tracker funds seek to fully replicate the underlying index’s composition. This is called a fully replicated ETF.

Others will seek to replicate the majority of an index’s underlying composition of shares or bonds and typically ignore the smaller constituents – these are called partially replicated ETFs.

Partially replicated ETFs seek to minimise costs by avoiding buying the very smallest shares or bonds in an index. Doing so won’t materially impact the fund’s ability to replicate the index’s performance.

Passive vs actively managed funds

Funds can be either passive or actively managed.

A completely passive fund seeks to replicate the holdings of a particular index by buying shares or bonds in direct proportion to their weight within the index.

For example, a fully replicated FTSE100 tracker fund will buy shares in all of the companies that make up the FTSE100 index in proportion to their value in the index.

A fully replicating fund like this does not need much human involvement. An algorithm can be programmed to follow the movements of the FTSE100 and buy and sell stakes accordingly to mirror its movements.

Not all tracker funds are fully replicated, though – as we outlined above. Fund managers may also decide to adjust the relative weighting of certain stocks within a tracker fund. This could be based on dividend yields of certain stocks, or in some cases, the sheer size of a stock.

Actively managed funds, on the other hand, have professional fund managers who make investment decisions for the fund. Typically, an actively managed fund aims to outperform the market – the fund managers will set a benchmark they measure themselves against.

Because they require more input from investment professionals, actively managed funds are usually more expensive than passive funds. Actively managed funds are more common with mutual funds and investment trusts.

Is it safe to invest in ETFs?

ETFs are one of the safest types of funds to invest in in terms of their low failure rate. This is partly because they often have a simple mandate – to replicate a well-known stock or bond index.

They’re considered by many to be safer than mutual funds, as mutual funds can often have much higher risk mandates – meaning they invest in a wider range of riskier assets, including unlisted shares.

But, we outlined some of the riskier types of ETF above. If you’re considering trading leveraged ETFs, using CFDs to trade ETFs or trading synthetic ETFs then you should make sure you’re aware of the associated risks. As with all investing, your capital is at risk.

This is why it’s important to choose from the best ETF platforms in the UK which we cover in this guide.

All of the platforms in this guide are regulated by the FCA, which is the UK’s regulator for financial firms.

Your money and investments are also protected under the Financial Services Compensation Scheme (FSCS) when held with these UK ETF platforms. This guarantees up to £85,000 if your provider were to go bust.

But, some ETFs are registered outside of the UK, typically in Ireland (for tax reasons), and may not be covered by the FSCS. However, there are other compensation schemes run by different jurisdictions. Ireland has its own Investor Compensation Scheme.

You should always check the Key Investor Information Document (KIID) of any ETF you invest in to check investor compensation scheme coverage.

It’s also important to be aware that you’re able to complain to the Financial Ombudsman Service (FOS) about an FCA-regulated company if you’re unable to resolve a dispute directly with the company. The FOS’ decisions are binding, and should give you extra comfort when choosing the best ETF platform for your needs.

Best ETF platform UK – final verdict

That covers the best ETF platforms in the UK.

For investing in a general investment account eToro is our top pick. It’s also our pick for best ETF trading platform in the UK.

The best ETF platform in the UK for investing via a Stocks and Shares ISA is InvestEngine. It’s totally free from platform and dealing chargers when you pick your own ETF investments and have over 610 ETFs to choose from.

To invest in ETFs within a SIPP, we recommend AJ Bell for their low dealing and platform fees and great customer support.