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IT IS NO LONGER POSSIBLE TO START A NEW PEP, OR ADD TO AN OLD ONE.
The information below is left as a matter of record, but any new money must go to an Individual Savings Account.
If you were using a PEP for savings purposes, esp if for a mortgage, school fees etc then it is absolutely vital to ensure that you do use an ISA to continue saving, otherwise you will have a shortfall in your funds.
It is estimated that at mid April 99 only half of people with PEP mortgages had set up the corresponding ISA.
Note - while the PEP cannot accept new money it is in no way frozen. You can cash it in, you can move the investments around. It remains tax free, it grows tax free etc etc. It is a marvelous investment, (which is why, a cynic would say, the Government stopped them and replaced them with stupidly complex ISAs), and should be held onto until you have very good reasons not to.
OLD ARTICLE.
Personal Equity Plans (PEPS) are investments that are totally tax exempt, both on the capital and income side. Personal Equity Plans (PEPS) are the best long term savings deal outside of pensions.
As such Personal Equity Plans (PEPS) provide an excellent method of long term saving.
Mainly in the equity area so short term falls are to be expected.
Personal Equity Plans (PEPS)are used for general saving, as mortgage repayment vehicles, school fees planning, retirement planning.
The underlying investments of Personal Equity Plans (PEPS) are Shares, Unit Trusts and Investment trusts.
You may only contribute to one ordinary Personal Equity Plan (PEP) in any tax year and only up to £6000pa per person. You may also put £3000 a year into single share Personal Equity Plans (PEPS), which although not suitable for most investors ( as such holdings imply a share portfolio of at least £60,000, and investors with less than this will be at risk from the movements in their Personal Equity Plan (PEP) shares, a case of having too many eggs in one basket), Personal Equity Plans (PEPS) can be useful for those who are given shares by employers, or speculative investments in very small cutting edge companies.
Corporate Bond Personal Equity Plans (PEPS) have recently entered the market. Be careful.
IMO these may be sold to people who need income but are unaware of, and unwilling in
reality to accept the capital risks involved. See Corporate Bonds.
Personal Equity Plans (PEPS) can be bought direct from the companies who sell them, ( from
adverts in the press, or from their salesmen ), or from an Independent Financial Adviser.
Buying direct can save you a little money (2-3% perhaps ), but unless you understand what
you are doing the Independent Financial Adviser is the best route. Experienced investors
should consult their stockbroker.
The costs of a Personal Equity Plan (PEP) varies according to the vehicle used, single share Personal Equity Plans (PEPS) are cheapest. Stockbroker run Personal Equity Plans (PEPS) can be good value for the person who likes to Buy and Hold, but less so for the active trader. But most Personal Equity Plans (PEPS) are Investment Trust or Unit Trust based and as such you can normally expect to pay an entry fee ( typically 5% in a Unit Trust, and an Annual Management Charge of .25% to 2.5% depending on the nature of the Trust).
Past Performance is NOT a guide to future performance of Personal Equity Plans (PEPS), or anything else for that matter. This bland statement is statistically true. As a buyer it means that having selected a group of funds that invest in markets that you like, chosing between them will never be more than luck. That said, there is no harm in hoping. See Lies, Damned Lies and Past Performance Statistics for details.