SHARE dealing by unit trust managers is costing savers about £1.7 billion a year, taking their total expenses to beyond £5 billion, according a survey published yesterday.

Fitzrovia International, the consultancy, studied the annual reports of nearly 1,000 UK-listed funds and estimated that dealing costs ranged from less than 0.33 per cent of assets to more than 1.14 per cent.

Trading expenses have been branded “an unnecessary tax on investors” by Paul Myners, former chairman of Gartmore Investment Management and author of a government report on fund management.

Mr Myners, whose report two years ago sparked an overhaul of City broking commissions, said yesterday that dealing brought “very questionable benefits” to investors because seven out of ten funds failed to improve returns by trading.

He said: “There is little reason to believe that, on average, fund managers add value. About 70 per cent of equity unit trusts would have produced better returns if the managers had left their portfolios completely unchanged for three years.”

Share dealing costs include commission paid to City banks for brokerage and research, as well as stamp duty at 0.5 per cent on stock purchases. They take average total expenses on a unit trust closer to 2.3 per cent, against the advertised 1.5 per cent management fee.

If levied on the £246 billion of assets held in unit trusts at present, savers would shoulder total costs of about £5.6 billion.

Many fund managers argue that higher costs are offset by superior returns.

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