Banks under fire as costly funds deliver low returns

HIGH street banks have been accused of selling low-quality investments to customers that are failing to beat far cheaper alternatives.

Investment funds from Barclays, HSBC, RBS and Santander have struggled to match the returns of the FTSE 100 index. Yet in some cases customers are charged 26 times more in fees.

Experts say hundreds of thousands of investors would be better off moving their money elsewhere.

RBS charges fees of 1.55 per cent a year for its Managed Equity fund. This is 26 times more than the 0.06 per cent fee charged by the ishares Core FTSE 100 fund. On top of that, the RBS account earned investors 1.8 per cent in the last year, less than the 10.6 per cent delivered by the UK ishares fund.

Baroness Altmann, a former pensions minister, said: “Customers are maybe being taken advantage of because they assume that a big company is more trustworthy and more reliable.”

Spokesmen for HSBC, Santander, Natwest and Barclays said it was unfair to compare their portfolios, which invest across a range of asset types in order to reduce risk, against passive funds that tracked only stocks.