I know what the transaction costs are and I know what they're paying for. They're paying for the fact that I don't have to buy and keep certificates for hundreds of different shares to ensure my money is sensibly diversified. You should try actually reading the details of what it costs to invest your money in the markets, it's extremely tedious but much more relaxing than the miasma of fear you've surrounded yourself with.
"Pay National Insurance? Same thing?" - Er, no, I know exactly what happens to my National Insurance, it goes straight into my parents' bank account via their State Pensions, along with all the other pensioners, the unemployed, benefit claimants, etc. It never goes anywhere near the markets.
@Cynic: Not remotely true. A teacher in a sink school teaching 30 disruptive children puts in more work than a teacher teaching 10 attentive kids in a fee-paying school, they still get paid less. A serf working a strip of land with an ox puts in the same work as a farmer with a hundred acres and a fleet of machinery, they still get paid less. Remuneration is not about a central planning committee looking at how much work you've done and handing out wages accordingly.
Liability, insurance, capital adequacy and regulatory costs all go up in proportion the more money you look after. As, to a certain extent, do research and staff costs. (If your fund doubles in size from £10m to £20m you can not simply chuck that £10m into the companies you already hold without hitting issues with diversification, the cost of acquiring that many shares and owning too large a chunk of one company - even if you wanted to, there are regulatory limits.) Costs have to be paid for. If you don't think they're worth paying, well, it's a free market and there's always the mattress.
Incidentally *transaction* costs are often in pounds and pence depending on your trading platform, though management costs are usually a percentage.