Money: A-Z of finance
Wednesday 27 March 1996
They offer the tax-free advantages of a Personal Equity Plan - no income tax, no capital gains tax liability, not even if you are a higher-rate taxpayer, and there is no need even to report them on your tax form. You do not lose the tax advantages you have already received if you sell them.
Most providers charge an initial fee and an annual management charge, but corporate bond PEPS were launched at a time of growing competition between providers and average charges are lower than on most of the early PEPs invested in shares.
The average yield on corporate bond PEPs will vary as prices rise and fall. But the average dividend yield on a corporate bond PEP is currently around 8 per cent a year, roughly double those of most PEPs invested in ordinary shares. Loan stocks and gilts do go up and down in value of course, because the relative value of the fixed interest your loan stocks earn goes up when interest rates in the rest of the economy go down, and the value falls if interest rates available elsewhere rise.
In fact interest rates have eased since last July, and the value of the first corporate bond PEPs has actually risen by an average 5 per cent. Net purchases of corporate bond PEPs jumped to a record of pounds 163m in February, 35 per cent of the total pounds 468m invested in PEPs of all kinds.
There is always a risk that an individual company can go bust and its loan stocks become worthless. But with the exception of a handful of single- company corporate bond PEPs that are invested in the stock of a single named company, the vast majority of corporate bond PEPs are invested in at least 20 different stocks, so the risk of wipe-out is limited.
21 November 2014 06:44 PM
Your children have it all, your partner gets nothing
21 November 2014 07:12 PM
Halfords is gearing up for Christmas
21 November 2014 06:54 PM
Fields of dreams: venture capital trusts help young companies to grow, potentially delivering big returns for investors
21 November 2014 06:32 PM
There are many reasons for people to turn to high-cost credit, but being turned down by their banks for a loan is one
21 November 2014 07:15 PM
The £150 incentive from Yorkshire and Clydesdale runs from now until 28 February next year, but you must use the official Current Account Switching Service (CASS) and close your existing account to qualify
14 November 2014 04:42 PM
For the rising number of homeless women, the struggle is compounded by health problems and by losing their children
14 November 2014 05:37 PM
Research from Sainsbury’s Bank Credit Cards this week revealed that 15 per cent of people making a large purchase on their plastic didn’t use one with 0 per cent interest on purchases
14 November 2014 05:23 PM
Last week was hangover time, when Stock Spirits, a vodka producer, distilled a profit warning that sent its shares crashing more than 25 per cent
14 November 2014 05:17 PM
Investment melting pot: the price of gold may have fallen but Artemis Strategic Assets believes its value cannot be debased
14 November 2014 05:05 PM
Interest rates are currently as low as 0.1 per cent
14 November 2014 05:01 PM
The energy watchdog Ofgem has slammed Scottish Power, while Citizens Advice reports a string of complaints about it
14 November 2014 04:57 PM
John Lush from Hampshire got into debt with payday lenders and had the help of a debt management adviser to clear the £20,000 he owed
08 November 2014 12:00 AM
01 November 2014 12:00 AM
01 November 2014 12:00 AM
£1,430,000,000,000 (that's £1.43 trillion): Britain's personal debt timebomb
Simon Read: There may be trouble ahead for cohabiting couples who don’t make a will
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