Indeed, in a few cases over the years, the funds in question may well have lost savers a large slice of their original investment. Under such circumstances, many savers will be tempted to bury their heads in the sand. Others will take the attitude that, well, perhaps the fund in question did not do well this year. But switching to another one deprives the old one of the chance to recover some of its lustre. Indeed, there is some evidence that this is exactly what happens in the case of pension funds; a recent survey showed that where trustees of occupational pension schemes ditched a poorly performing fund manager, that firm often delivered better returns the year after being dumped - better, even, than the one chosen to replace it.
That said, there are times when it is impossible to ignore reality: some funds really are dogs and nothing, but nothing, will change the fact. If this is the case, it is time to switch.
If so, here are some simple rules to bear in mind:
t There is no problem with switching from one PEP provider to another. This will continue to apply even after PEPs are replaced by new-style ISAs in April.
t If you want to transfer a PEP to an ISA, the most you will be allowed to move in one year is the maximum equity-linked limit of pounds 5,000 a year (pounds 7,000 in 1999/2000). But doing so means you will lose that amount of ISA allowance, so it makes sense to transfer to another PEP.
t Some companies administer their plans so that each year's separate PEP is amalgamated with previous years'.
This means that if you have been with a company for two or three years, all your investments may technically count as one PEP, even if you have built up a stable of different funds, some of them doing much better than others. Ask if you are allowed to switch just the poor performer. If you are in this position, seek independent financial advice.
t Beware of penalties. Some managers will apply exit charges, measured in percentages or in a flat fee, when you transfer the PEP.
t To prevent the situation from deteriorating again, be prepared to review your PEPs' performance annually. If they have done dismally for three years or more compared to their sector in the market and you are no longer satisfied by the answers to your questions, then move.
`The Independent' has published a free 28-page Guide to PEPs, with advice on the types of PEPs available, how to choose between them, where to buy them and how much to pay for them. The guide, sponsored by Scottish Widows Fund Management, is written by Nic Cicutti, personal finance editor of `The Independent'. Call 0345 678910 to obtain your copy of the guideReuse content