How to play by the Inland Revenue's rules

Because personal equity plans are tax shelters, their ownership and operation are subject to specific Inland Revenue rules.

You must be over 18 and live in the UK. Married couples can each have a PEP - but cannot transfer unused allowances to the other partner. You cannot open a PEP on behalf of children or grandchildren.

You can open new PEPs in each tax year - but if you do not invest up to the limit in one year you cannot roll over the unused allowance.

These limits apply only to "qualifying investments" which are strictly defined.

Authorised unit trusts and investment trusts must hold at least 50 per cent of their funds in such investments.

Shares in companies registered in the UK or any other EU member state and which are quoted on a "recognised European exchange" are also covered. This covers the main London market and continental bourses, but not the Alternative Investment Market.

Single company PEPs - which have a separate pounds 3,000 limit - can invest only in the ordinary shares of a single EU company (excluding investment trusts).

If your PEP invests in non-qualifying assets - those not listed above - the investment limit for each tax year is pounds 1,500 rather than pounds 6,000.

Corporate bond PEPs can invest in debentures, preference shares and convertibles.

They must hold at least 51 per cent of their funds in such qualifying assets; the balance can be held in "non-qualifying" assets - which generally mean cash, bank deposits and gilts.