Fidelity introduced the novel charging structure in June 1992 but has discovered that investors find it too complicated. It plans to replace it with a low front-end charge.
This coincides with M&G joining the management groups using a graduated exit charge. M&G is the largest PEP provider with pounds 914.7m under management.
It will abolish the initial charge for investors in the Managed Income PEP Fund from 4 January. This is M&G's most popular PEP and has taken in more than pounds 95m since it was launched last February.
Those leaving within the first year will pay 4.5 per cent. This reduces to 4 per cent in the second year, 3 per cent in the third, 2 per cent in the fourth, 1 per cent in the fifth and a free exit for those who stay invested any longer.
Peter Emms, M&G's sales and marketing director, says: 'We believe that as well as providing good value this move will make the managed income fund PEP a more straightforward investment, and thereby provide an added attraction to people who have never before invested in a personal equity plan.
Under Securities and Investments Board rules unit trusts are not allowed to scrap initial charges and replace them with exit charges. But unit trust groups can impose this charging structure on PEPs.
Gartmore introduced exit charges on all its PEPs in July 1992. Like Fidelity's 11 unit trusts, it has an entry charge, of 2 per cent, with a 3 per cent exit charge in the first year, 2 per cent in the second and 1 per cent in the third.
Guinness Flight introduced exit charges in February on its equity unit trust PEPs. It still pays 3 per cent commission to advisers selling the plans.
A Guinness Flight spokesman says: 'Pricing strategy alone cannot sell the products.
'To my knowledge the only encashments have been people who have died, and we don't impose an exit charge on them.'