Building Society windfall survey: Put your eggs in a professional basket

Many firms are offering attractive deals to lure windfall cash into PEPs or investment trusts. Tony Lyons runs through the options
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The Independent Online
Leave it to the professionals. Or, in other words, use your windfall shares as a stake in the capital appreciation game by letting a professional fund manager look after it for you.

All the main investment management groups are keen to get their hands on your windfall. You must decide whether you want to keep the shares in your name or transfer them into units in one or more of a management's funds.

The art of successful investment is having a diversified share portfolio, which is Cityspeak for not having all your eggs in one basket. At present the financial sector is having a good run on the stock market. But this will not always be the case. Share prices can, and do, go down as well as up in value. By investing in a portfolio of companies you protect yourself against the swings, or volatility, in individual stocks.

All the leading investment groups have share exchange schemes. If you have individual shares that they consider good investments they will exchange them for units in their funds. This will always be at an advantageous rate to using a stock broker.

With this year's windfall shares the price for exchanging them is cheaper than ever. Most leading unit trust and investment trusts will only charge a small transfer fee and will exchange them for units at the offer price, that is, the buying price, which usually includes an initial charge of up to 5 per cent.

But, assuming that you are a taxpayer, you would be better off to PEP your windfall shares. By putting them into a personal equity plan you will receive all future dividends and growth free of all tax. Do remember you are only allowed one PEP manager and you have only six weeks from the date of receiving your shares to put them into a PEP. So if you already have a PEP see what the manager is offering. If you are new to PEPs then most of the groups have cheap offers for your windfall shares. Some unit trust managers will only exchange your shares for units. Of these, Schroders has one of the most attractive deals, making no charge for the transfer into units and offering them at a "creation" price. Whenever a unit trust manager takes in new money it creates new units (cancelling them when an investor sells). Normally these include an initial charge. Schroders, however, will exchange your windfall shares without this initial charge, though you must invest at least pounds 3,000 if a new client. There is no minimum amount for its existing clients.

Other unit trust groups will make a charge for the transfer, exchange units at the offer price, or a combination of the two. Credit Suisse, for example, will charge pounds 11 while Abtrust will charge pounds 25. Others, such as Jupiter and Framlington, will make no charge. If pounds 6,000, the maximum that can be put in a general PEP is any tax year, is invested with Lazards there is no charge, otherwise it will charge pounds 25. All will exchange units at the offer price.

Some management groups will let you shelter your windfall shares in their general PEPs without you having to exchange them. This means that you can retain ownership of the shares until you decide to sell, sheltering all the benefits in a PEP. If not an existing client, you will have to open an account with them at the same time.

Fidelity, for example, will waive all charges for existing and new clients investing more than pounds 1,000. Otherwise, it will charge pounds 15 a year after 6 April 1999. Mercury will charge pounds 15 a year while M&G will charge pounds 8 a year for each individual windfall stock sheltered in a PEP. Others, such as Henderson, Invesco and Perpetual will charge pounds 4 or pounds 5 for each dividend collection on windfalls.

What all the fund managers offer is the chance to invest in professionally- managed portfolios. You will be able to share in a large, diversified basket of underlying securities, something only the very wealthy can do for themselves. By this means you can secure long-term capital growth and dividends at less risk.

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