It's that time of the year again
Saturday 15 February 1997
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.
23 January 2015 08:00 PM
I had dinner with the pensions minister Steve Webb this week. There was a wide-ranging discussion about the new pensions freedoms starting in April, and changes to the state pension. Crucially, I also got to ask Mr Webb whether he had any plans to have another look at the injustice that is frozen pensions.
23 January 2015 08:00 PM
While the health of the economy is not insignificant, Mark Dampier finds it incredibly unpredictable in terms of its impact on the stock market
21 January 2015 12:32 PM
A new free app is aimed at the three-fifths of Brits who have never switched supplier
20 January 2015 09:34 AM
Regulator’s investigation into the market found that around £160bn was held in easy access savings accounts that pay interest lower or equal to BoE base rate
17 January 2015 12:00 AM
Simon Read: Information is power. And it's in the wrong hands when people are cold-called by companies that know they're in debt
17 January 2015 12:00 AM
In debt? You're likely to be targeted by unscrupulous companies that hope to profit from your misfortune. They may try to pretend to be your friend by offering what they call "help" – but almost certainly that help will come with a cost and leave you worse off than you were before they got in touch.
17 January 2015 12:00 AM
In less than three months' time radical changes to pensions will take effect, providing investors with more freedom. Yet for those who prefer to make their own investment decisions, the choice of funds available is overwhelming. And an income drawdown account is also not particularly easy to manage.
15 January 2015 12:23 PM
The minimum amount for which you can be forced into bankruptcy is being raised from £750 to £5,000
14 January 2015 08:55 AM
A shock report reveals that fuel poverty is affecting desperate families – and their children
14 January 2015 08:59 AM
Most people are too confused to know how to use their pensions for a secure income
10 January 2015 12:00 AM
Simon Read: Inflation is riding the slow train. So why have we been given a one-way ticket to travel on the fares express?
10 January 2015 12:00 AM
I struck a chord with many of you when I wrote a piece earlier this week about rising train fares. It seems there is an army of travellers who feel they've been ripped off by increased transport costs.
26 December 2014 02:31 PM
Poor service from banks and energy companies has sadly been a theme this year
Buyers beware of new-build home headaches
Are you ready for pensions reforms?
Dirty tricks in a divorce can cause some nasty surprises
Simon Read: Frozen in time - the expat British pensioners who deserve a better deal
Number of serially under-performing investment funds has increased by a fifth, survey reveals
- 2 Man who held up 'hire me' sign at Waterloo station returns a year later with 'I'm hiring' sign
Nigel Farage: NHS might have to be replaced by private health insurance
'We would evict Queen from Buckingham Palace and allocate her council house,' say Greens
French court convicts three over homophobic tweets, in case hailed as a 'significant victory' by LGBT rights campaigners
British Muslim school children suffering a backlash of abuse following Paris attacks
George Galloway condemns 'racist, Islamophobic, hypocritical rag' Charlie Hebdo at freedom of speech rally
Islamic history is full of free thinkers - but recent attempts to suppress critical thought are verging on the absurd
iJobs Money & Business
Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...
£16000 - £25000 per annum: Recruitment Genius: This is an exciting opportunity...
£45000 - £47000 per annum + bonus + benefits: Ashdown Group: Java Developer / ...
£35000 - £38000 per annum + Benefits: Ashdown Group: Marketing Manager - Marke...
Day In a Page
Hibernate during winter and make your living during the summer at this busy guesthouse with panoramic sea views, in the village of Lynton
A four-bedroom penthouse next to the Tate with direct views of St Paul's from two floors of luxurious living space
A four-bedroom detached home surrounded by spacious gardens and woodland, close to New Pudsey
An 18th-century, three-bedroom home near Langstone Harbour built from ships beams with vaulted ceilings and wood burning stoves
A five-bedroom semi-detached home with a mix of period and modern features in a popular and convenient location
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
A three-bedroom villa with self-contained flat, minutes from Lake Windermere
A deceptively spacious, beautifully presented Georgian home with 3000sq ft of living space and five reception rooms
A five-bedroom Victorian home with four receptions, superb gardens and paddock in Pembury
An eight-bedroom house on the south side of the The Green with cinema, wine cellars and summer house
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
Four exclusive apartments in a Grade II-listed former medical school with 2,275 sq ft of living space and 18ft ceilings
A five-bedroom terraced house on the popular Peterborough Estate, ideally located for both Eel Brook Common and South Park
A state-of-the-art farm-building conversion on the former Cliveden Estate, with 11,420sq ft of internal space, cinema and wine cellar
A three-bedroom, 15th-century cottage with original features in the picturesque village of Sissinghurst
A six-bedroom terraced house with large south-facing roof terrace, cinema room and wine cellar
A new seven-bedroom home built in Queen Anne-style with swimming pool and parkland views in Mortimer
A listed, four-bedroom farmhouse in the rural hamlet of Rushall with detached barn, four acres of gardens and paddocks
A first-floor flat with two bedrooms, a spacious reception room and communal grounds in a leafy part of London
A three-bedroom flat with a spacious rootop terrace and balcony, accessed from a private gated courtyard
A Grade II-listed pile with six bedrooms, stables and 39 acres of grounds in Standlake
A two-bedroom flat with boutique hotel-style interiors, close to the foodie haunt of West End Lane
A two-bedroom flat in a beautiful old vicarage, with many original features, close to the city centre
A three-bedroom 16th-century home with an aga kitchen, private gardens and heated outdoor pool, in Hadleigh
A three-bedrom home in sought-after Queen's Gate Mews, with Italian marble-finished bathrooms
Surrounded by glorious countryside in the village of Udimore, sits this impressive four-kiln oast and barn conversion
A five-bedroom house in the picturesque village of Kettlewell, north Yorkshire
An 18th-century former coaching inn with original staircase, open fireplaces and beams throughout
A Grade II-listed Georgian town house with three bedrooms and a south-facing courtyard, near Arundel Castle
Feel on top of the world at this über chic penthouse on the 37th floor of one of Europe’s tallest blocks.
A Grade II-listed Victorian villa with six bedrooms and two further cottages, all with spectacular sea views
A grade II-listed, Georgian cottage with mature 50ft garden, perfect for summer entertaining
A magnificent Georgian pile with turrets, seven bedrooms, a heated pool and four acres of gardens
Fairoak Farm has five bedroom suites, gym, outdoor swimming pool and golf course
Chic two-bedroom river-fronted flat with a private lift that delivers you directly to your home
A spectacular seven-bedroom Tudor pile, once owned by Henry VIII, with 18 acres of land
A seven-bedroom Georgian property previously used as a picturesque wedding venue
A split-level flat in a church conversion with two en suite bedrooms and 1,200sq ft of living space
A three-bedroom bungalow situated behind an impressive stone wall, £645,000
Windsor Castle overlooks this three-bedroom Victorian cottage located on one of Windsor's smartest roads
Chapel House is a former vicarage with nine bedrooms in the beautiful Upper Wye Valley
A five-bedroom B&B and separate owner's accomodation with potential for conversion
Enjoy summer by the Thames in this two double-bedroom converted warehouse in Rotherhithe village