New F&C trust will take PEP investments

FOREIGN & COLONIAL is launching its first new investment trust for 11 years. It is a simple trust designed to take personal equity plan investment.

The Government has relaxed the rule that investors could put no more than pounds 3,000 of a PEP into an investment trust or unit trusts. The entire pounds 6,000 can now be in managed investments rather than direct shares.

F&C's flagship pounds 1.1bn trust had too large a percentage of its funds overseas to even qualify for the pounds 3,000 limit, and was constrained to pounds 1,500 investment via a PEP. Now the existing 5,000 PEP investors are being asked if they want to switch the funds in shares into the new trust, Pepit. 'We are giving investors a choice, unlike some other management groups,' Jeremy Tigue, a director of F&C Management, said.

The 1,900 PEP clients who have already agreed to switch into Pepit have some pounds 8m to invest in the new trust. Others are expected to follow when the offer period begins. The giant F&C Trust is taking pounds 10m of the shares in the new trust. 'That will ensure we have critical mass,' Mr Tigue said.

The trust will have three-quarters of its funds in blue chip FT-SE stocks. The yield on Pepit is expected to be 4.5 per cent, in line with the FT index. This means that the average income tax saving for a basic rate taxpayer on dividends of pounds 67.50 on a full pounds 6,000 PEP will just cover the flat fee of pounds 60 a year levied on F&C PEPs. This fee remains constant even if future PEP investments are made. The expenses of the launch are limited to 2.5 per cent and there is a 0.4 per cent annual management charge.

F&C is fairly confident that the trust will move to a premium rather than a discount to net asset value.

Pepit Hotline 071-454 1415