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The Independent Online
Nobody who opens a newspaper these days can doubt that this is the time of year for personal equity plans, or PEPs. With the end of the tax year barely a month away, the marketing effort by providers of PEPs is at its customary annual peak.

As a nation, it seems, most of us are unable to do anything with potential tax benefits until the last minute, and the suppliers of PEPs are naturally doing all they can to cash in on this most human of failings.

There is nothing much wrong with that. It is clear that PEPs have proved a worthwhile innovation since they were launched a few years ago. True, their global impact on savings patterns has been fairly marginal. The majority of people still prefer the security of building society savings schemes, such as Tessas, to the potential rollercoaster ride of UK and European stockmarkets. But they have done a good deal to increase public awareness of the value of pooled equity investment.

The ''tax-free'' tag is a powerful marketing tool, even if for most investors the actual gains from putting their equity investments in a PEP is limited. For a long time, high charges ate up most of the tax savings investors made on their dividend payments. The people who really benefit from PEPs are those who have capital gains tax liabilities to shield, and that is still not a large number.

Overall, in a buoyant equity market, the arrival of PEPs has made a sizeable splash, vacuuming up tens of billions of pounds since their launch in 1987. The scale of investment has also been boosted by concessions from a succession of Chancellors.

The growing competition to provide low cost no frills PEPs - for example, index-tracking funds - is one of the most encouraging developments. The problem facing most investors now is that the choice of Peps has become bewilderingly large.

The latest guide by Chase de Vere, for example, lists no fewer than 1,190 different Peps, and picking the right one is no easy task.This is caused by the determination on the part of fund managers to pull in as much money as they can. To do this, they launch funds that are - despite all their claims - almost identical to those of their rivals, multiplying the confusion of choice. Increasing numbers of financial advisers are becoming concerned at the problem.

The charges are still more opaque than they should be. The new disclosure rules designed to make charges more transparent do not come into force until later this year. In any event, proposals by the regulator - the Personal Investment Authority - were judged to be so limp that they have been vetoed by the Office of Fair Trading.

Looking at a recent survey by consultants Watson Wyatt , it is interesting to see which names have done best in attracting funds in the different sectors. In the index-tracking sector, for example, where Fidelity has just joined the competition, Legal & General has attracted the most funds - pounds 368m at the end of last year - its distribution network putting it ahead of Gartmore, Virgin, Midland and Morgan Grenfell.

Index tracking funds will, it seems certain, do very well over the next few years, and as this is essentially a commodity market, you will expect the bulk of the funds to go to firms that can provide the cheapest product, or have some other reason - such as the Virgin brand - for winning a customer following.

Trackers, are by definition supposed to follow the market, although of course individual companies will tell you that each of them does it in a way designed to ensure better investment returns. Even so, if you've seen one tracker, you've seen them all, or just about, which is why these funds compete on price.

Among the higher income PEPs, the biggest funds, in order, are M&G, Clerical Medical, Newton, Schroders, Perpetual and Allied Dunbar. It is hard to discern much of a pattern there, although it is interesting that they include at least three of the best specialist stock-picking fund management groups (M&G, Newton and Perpetual).

In this sector there seems to have been little competition so far on price. Nearly all have relatively high initial charges and pay good commissions to intermediaries, but their performance has also been good, so presumably investors are mostly happy to pay the extra costs, or may be unaware of how much they are being charged.

The investment trust PEP table shows that, of the trusts which responded to the survey, the one that had attracted most funds is none of the better known names, but Alliance, the Dundee-based investment trust company which is the byword for Scottish parsimony.

This is a quality, in my opinion, which investors should rate more highly than they sometimes do. The two investment trusts Alliance runs have done well for their shareholders fo many years - nothing flashy, but solid, consistent performance at or above the market average - and rightly have a loyal following.

Investment trust PEPs generally are cheaper than their unit trust equivalents, but have long suffered from a lower profile in marketing. Apart from Alliance, other substantial investment trust PEP funds are those run by Schroders, Murray Johnstone and Dunedin (which is in the process of being taken over by Edinburgh Fund Managers).

Overall, the lists of successful PEP providers prompts two thoughts. One is that the market is still quite highly differentiated, with each sector having its own market leaders.

The second is that, while PEPs generally are much better value than they were, there is still massive scope for costs to fall. What it needs is for customers to start flexing their muscles and to demand greater information and cost competitiveness from providers.

May independent financial advisers do a good job in assessing the relative performance of different fund providers. Some have access to professional specialist fund rating services that provide detailed information on all the different PEPs and their managers. But what we still lack in this country is a similarly specialist service for the retail market which can be bought directly by members of the public at a suitable price.

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