It's that time of the year again

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The Independent Online
Hey-ho me hearties! The PEP selling season be upon us! And if that sounds aggressively swashbuckling, just look at the number of advertisements for PEPs, or sift through the reconstituted acres of forest that will have been pouring through your letterbox during the past few weeks.

The exultation is to Buy! Buy! Buy! But should you? My view is that of the typical economist. "On the one hand ... and on the other. "

Let us start with a bit of history. PEPs are 10-years old next month. Like many in the stockbroking community, I was slow to come round to their attraction.

But history has shown that PEPs were indeed a good idea. Since their launch, share prices have trebled and it is not unusual to find someone who has burrowed into their savings on a regular basis to top up their PEP pile with portfolios now worth pounds 100,000-plus.

But what exactly is a PEP? It stands for personal equity plan. I hope I do not appear condescending. It is just that we seem to have forgotten that a PEP is not a product. It is simply an envelope into which other forms of savings and investment are put, which makes them invisible to the taxman. This is where PEPs really come into their own.

Did you know that the responsibility for ensuring that all the niceties for the Inland Revenue are observed lies with your plan manager? You do not have to enter a PEP on your tax return. Not its purchase, or its sale, or any of the changes that take place during its life.

PEP has become a word in its own right. I expect to hear it adopted into the Oxford English Dictionary at any moment. The fact that you can now buy corporate bond PEPs is a clear sign that people have forgotten their origins. Corporate bond equities? The very idea!

I come back to the fact that PEPs are viewed as a product - particularly by those trying to sell them. I believe they should be viewed for what they are - personal equity plans. In other words, an incentive to buy ordinary shares direct.

Now, most PEPs that are sold are just unit trusts or other collective investments by another name. Still, it is wise to remember that these collective funds, for all their attractions, are not usually a cheap way of accessing the market.

If there is a high front-end charge, the effect can be to offset the tax advantages for many years to come.

But do not let me put you off. Anyone who has a share portfolio should be steadily transferring it into the PEP pot. And if you are unable to make adequate pension contributions, then a PEP is a good stand-by.

As to which PEP to buy. Well, if you are an investor with a reasonable amount of capital at your disposal, I still favour the direct equity approach.

After all, a husband and wife can put pounds 18,000 in now and another pounds 18,000 immediately after the end of the tax year in April - something we should all consider carefully if a general election is in the offing.

That pounds 36,000 can buy you a reasonable spread of risk. And if chosen carefully, the charges should be most competitive.

Brian Tora is chairman of the investment strategy committee at Greig Middleton.

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