The ongoing charges figure (OCF) is the annual percentage you pay to hold an investment fund, whether that is an OEIC, a unit trust, or an exchange-traded fund. It covers the fund manager’s fee, custody costs, legal expenses, and administrative overheads. The Financial Conduct Authority requires every UK-regulated fund to publish its OCF so investors can compare costs before they invest (FCA, 2026).

At first glance, a difference of one percentage point looks trivial. A fund charging 0.15% OCF versus one at 1.5% might seem like a rounding error when you are focused on picking the right sector or timing the market. Over two decades, however, that seemingly small gap compounds into a sum large enough to pay off a car, fund a child’s university fees, or add years to your retirement.

Why the OCF Matters More Than You Think

Every year, the fund deducts the OCF from your holdings. That cost is invisible in the sense that you never write a cheque for it; the fund simply grows slower than it would have done without the charge. The real damage unfolds through compounding: not only do you lose the fee itself each year, you also forfeit all the growth that money would have generated over the remaining years (Principles of Finance, 2022).

According to MoneyHelper, understanding the true long-term impact of charges is one of the most important steps an investor can take to preserve wealth (MoneyHelper, 2026). The OCF applies to the entire portfolio value, so as your pot grows, the absolute cash cost rises even though the percentage stays constant.

A Twenty-Year Comparison

Imagine you invest £20,000 in a global equity fund and leave it untouched for 20 years. The fund’s underlying holdings deliver an average annual gross return of 7% before any charges. What you actually receive depends entirely on the OCF.

Low-cost index fund (0.15% OCF): Your net annual return is 6.85%. After 20 years, your £20,000 grows to approximately £74,600.

Average active fund (1.5% OCF): Your net annual return falls to 5.5%. The same £20,000 grows to around £58,400.

The difference between the two outcomes is £16,200. You handed over the same initial capital, the underlying market delivered the same gross performance, yet the investor in the cheaper fund walks away with nearly 28% more wealth simply because a smaller fraction went to fees each year.

If you had faced no charges at all and earned the full 7%, your pot would have reached £77,400. The 0.15% fund cost you roughly £2,800 in forgone growth. The 1.5% fund cost you £19,000. That higher fee consumed a quarter of what the market delivered.

Typical OCF Ranges in the UK Market

Not all funds charge the same. According to Which?, costs vary widely depending on the fund type and how it is managed (Which?, 2026):

Read also: Index Funds Versus Actively Managed Funds in the UK: What the Fee Buys

  • Passive index tracker funds and ETFs: OCFs typically range from 0.05% to 0.25%. A FTSE 100 tracker or a global equity index fund often sits at the lower end of this band.
  • Active OEICs and unit trusts: Charges commonly run from 0.75% to 1.5%, with some specialist or smaller funds exceeding 2%.
  • Investment trusts: Many have lower ongoing costs than OEICs because they are closed-ended structures, though you pay dealing costs when you buy or sell shares on the London Stock Exchange.

The FCA’s transparency rules mean the OCF must include all predictable annual costs except transaction charges within the fund and any performance fees. Always check the fund’s key investor information document (KIID) or key information document (KID) for the current OCF before you invest.

What the OCF Excludes

The ongoing charges figure is comprehensive, but it does not capture every cost. Funds that trade frequently incur transaction costs (the spread and commission when the manager buys or sells holdings), and these sit outside the OCF. Some active funds also levy a performance fee if they beat a benchmark; that fee is variable and disclosed separately.

Platform fees (the annual charge your ISA or SIPP provider takes for holding your investments) add another layer. If your platform charges 0.25% and your fund charges 1%, your total annual cost is 1.25%, not 1%. Over 20 years, these seemingly small add-ons compound just as powerfully as the fund’s own OCF.

How to Minimise the Drag

Reducing the OCF you pay is one of the few levers entirely within your control. You cannot dictate what the market will return, but you can choose a fund that keeps more of that return in your pocket. Low-cost index funds and ETFs tracking major indices such as the FTSE All-Share or the MSCI World offer diversified exposure at a fraction of the cost of many actively managed alternatives.

For long-term goals such as retirement or a child’s future, even a 0.5% OCF saving compounded over two or three decades translates into tens of thousands of additional pounds. That is money that remains invested, continues to grow, and ultimately funds your life rather than the fund manager’s office.

Conclusion

The ongoing charges figure is not background noise. It is a permanent, compounding cost that determines how much of the market’s return you actually keep. Over 20 years, a 1% difference in OCF can mean the difference between a comfortable pot and one that falls short of your goals by five figures. Before you invest, compare the OCF across funds with similar strategies, check your platform’s own charges, and recognise that the cheapest fund is often the one that leaves you wealthiest in the end.

Financial Disclaimer: This article provides educational information and general guidance only. Nexzoe is not authorised by the Financial Conduct Authority to provide regulated financial advice. Investment values can fall as well as rise, and you may get back less than you invest. The OCF figures and return assumptions used here are illustrative; actual charges and performance will vary by fund and over time. Tax treatment depends on individual circumstances and may change. Before making any investment decision, consider consulting an FCA-authorised Independent Financial Adviser who can assess your personal situation, risk tolerance, and goals.