Fidelity cuts fees on its college savings plans

BOSTON Dec 1 (Reuters) - Mutual fund powerhouse Fidelity Investments said on Tuesday that it will charge less for administering seven state-sponsored 529 college-savings plans.

The Boston-based company said it will cut the fees by one-third to one-half across all of its direct and adviser-sold plans. The direct-sold plans include plans offered by New Hampshire, California, Delaware, Arizona and Massachusetts, Fidelity's home state.

The move comes as a growing number of parents are becoming disillusioned with the educational investment plans after some high-profile blowups and last year's financial crisis and are choosing to invest the money elsewhere.

Investors contribute after-tax dollars to 529 educational plans and the money is then invested in mutual funds or other portfolios. Investors can then withdraw the money tax-free as long as the money is used to pay for education.

Eager to retain business, large fund companies are now wooing existing clients and potential new business by agreeing to cut fees.

Investment manager TIAA-CREF, one of Fidelity's rivals in the area, slashed fees on its popular Managed Allocation option in Vermont to 53 basis points from 80.

Fidelity said it has cut its program fees in half (15 basis points) for its index portfolios and by one-third (10 basis points) across the plans' active portfolios.

This means that fees on the index portfolios now range from 0.25 percent to 0.35 percent of plan assets while fees for the actively managed portfolios now range from 0.59 percent to 1.04 percent of plan assets. (Reporting by Svea Herbst-Bayliss, editing by Gerald E. McCormick) ((Svea.Herbst@Reuters.com; +1 617 856 4331; Reuters Messaging: svea.herbst.reuters.com@reuters.net))