Personal Equity Plans: Singles given a new lease of life

UNTIL recently, single company PEPs were only considered suitable for investors who already had a large portfolio of shares or those in an employee share-option scheme.

Normally, if you already own shares and want to put them into a PEP, you have to sell them and let a PEP manager buy them back. But with shares bought or received at a preferential rate through an employee share-option or profit-sharing scheme, this does not apply so long as you put the shares in a single company PEP within 90 days. Companies with these schemes often appoint a PEP manager to operate them for employees and charges are low.

Last year saw another group of people investing in single company PEPs - the millions who received windfall shares from demutualising building societies and insurance companies.

Many of them had never owned shares before, but now wanted to shelter the free shares in the tax-free haven of a PEP. Single company PEPs made a potentially attractive home for them, as in many cases the investors had no intention of buying any other shares.

Investing in just one company's shares is usually a high-risk strategy. Most investors will want to diversify their risk and invest in a fund where their money is spread across a wide portfolio of equities. But with the new individual savings accounts due to replace PEPs in April 1999, investors with spare cash may want to reconsider the merits of single company PEPs.

Ian Millward, editor of Chase de Vere's PEP Guide, points out that under proposals for the ISA there will be no distinction between single company and general PEP money. You will be able to put up to pounds 50,000 of PEP money into an ISA. So if you do not have this much invested in PEPs and want to get as much tax-free savings as possible into an ISA at the outset, investing in a single company PEP now could make sense. "This way you can build up your PEP savings. Once you have tipped these into an ISA next year, you can then transfer the single company PEP money into a collective investment," says Mr Millward.

As with all PEPs, you have to invest in single company PEPs through a PEP manager. They can be self-select, corporate or managed.

More than 200 public companies have set up corporate PEPs to encourage people to invest in their shares. The company appoints a PEP manager who administers the scheme for them. Charges are low, and in some cases there are no fees at all. If you know which company's shares you want to buy, this can be a cheap way of setting up a single company PEP. But these schemes can be inflexible as often you can only hold that company's shares in the PEP. Corporate single company PEPs are generally run by the stockbroking arms of building societies and banks.

If you would like some help in selecting a suitable company, you should opt for a managed single company PEP where the manager chooses a company for you. Managed PEPs are offered by a number of stockbrokers as well as companies such as Fidelity, Perpetual and Johnson Fry. Check charges as these can work out expensive.

Single company PEPs do have limited appeal inasmuch as most of us will want more diversification in our investments than a single trading company. But some managers have taken advantage of loopholes in the PEP rules to launch "single company" PEPs that offer lower risks. One example is HSBC's Protector PEP which invests in one company, HSBC UK Equity Plus, based in Dublin. This in turn invests in a whole range of top UK companies. The HSBC Protector PEP qualifies as both a general and a single company PEP, and will run for two years. During this time, investors receive any growth in the FT-SE 100 index up to 10 per cent a year and their capital is also protected. If at the end of the period the market has fallen, savers will still get back all their original money. The PEP is available until 5 March, and the minimum investment is pounds 1,000. For more details call 0800 289505.

q Chase de Vere Investments publishes details of all the PEP schemes on the market. PEP Guide costs pounds 12.95 and is available by calling 0800 526092.

Start your day with The Independent, sign up for daily news emails
Suggested Topics
Life and Style
Steve Shaw shows Kate how to get wet behind the ears and how to align her neck
healthSteven Shaw - the 'Buddha of Breaststroke' - applies Alexander Technique to the watery sport
News
A poster by Durham Constabulary
news
Sport
Cameron Jerome
footballCanaries beat Boro to gain promotion to the Premier League
Arts and Entertainment
Performers drink tea at the Glastonbury festival in 2010
music
Have you tried new the Independent Digital Edition apps?
Finacial products from our partners
Property search
Up and away: rates will rise but your mortgage won't escape its moorings with a long-term fix

Is a 10 year mortgage deal a fix too far?

A cut-price deal for a decade-long home loan - where's the problem? Only, says Simon Read, that circumstances can change and it won't be easy to get out
In a surprise move the Tories have decided against putting a career politician into the job. Instead they’ve handed the responsibility to campaigner Ros Altmann

New pensions minister has massive job on her hands

The Tories have appointed campaigner Ros Altmann to the post

Promises, promises: David Cameron talks to staff at Asda's head office in Leeds today

General Election 2015: How you vote next week could affect your finances

Rival party pledges could shrink your savings or grow your nest egg
Logos for the 'Big Six'; energy companies (top row from left) British Gas, EDF, RWE npower, (bottom row from left) SSE, E.ON and ScottishPower

Winter heating underpayment brings summer pain

One reader’s monthly direct debit charge has been increased by 62 per cent

Almost 15,000 people died last winter through living in cold homes that they couldn’t afford to heat

Social tenants locked into energy tariff for 40 years

Many Londoners who live in social housing estates are not allowed to switch because their landlord has ‘locked’ them in to buying from one supplier

Will your credit card rewards be scrapped following new EU rules on charges?

Providers are unhappy with new EU rules - but ultimately it is customers who will have to foot the bill
There remain more than a million unclaimed Premium Bond prizes worth collectively around £48m

Have you won £1m in the May Premium Bonds draw?

More than £60m was paid out to more than 2 million prizewinners this month

The 0 per cent introductory deals that credit cards offer are one of the most odious tricks

Beware credit card firms’ odious tricks

Why can’t we just have open and honest charges, without all the cross-subsiding?

The pound’s recent strength against the euro could be hit by economic uncertainty under a new government

How planning can make your travel cash go further

With the pound at a high against the euro, it pays to buy now before uncertainty post-election

Put the phone down on the coldcallers who see pension liberation as an opportunity to liberate your pension from you

Pension freedoms: How to deal with cold calls from scammers

Sean O'Grady offers advice on keeping your money safe
Switching to a better bank account is much easier than it used to be

More people are switching current accounts – but what do the figures mean?

Experts disagree about the 7% increase over the past year

The chance of getting what appears to be free money can be hugely attractive, especially to first-time buyers who can be fooled into thinking it’s extra cash to buy the essential new items they need for their dream home.

Beware the boom in cashback mortgage deals

Too many mortgages are being sold with misleading gimmicks

The firm’s revenues slumped by a third to £217 million in a disastrous 2014

Wonga results could get even worse this year, chief admits

The firm’s revenues slumped by a third to £217 million in 2014

The cost of a buildings policy has dropped by 10.1 per cent over the year, with the cost of a contents policy falling by 8.2 per cent

Simon Read: Mild winter cuts the cost of home insurance

The average quote for a buildings and contents policy has fallen by 3.6 per cent

Don't count your retirement money yet: employers will stop receiving a pension rebate next year and their staff may lose out

Defined-benefit pension schemes: Rebate change in 2016 may leave you out of pocket

Employees in defined-benefit schemes are held up as the lucky ones, but the state pension scheme will be overhauled in April 2016
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

ES Rentals

    iJobs Job Widget
    iJobs Money & Business

    Guru Careers: Software Developer / C# Developer

    £40-50K: Guru Careers: We are seeking an experienced Software / C# Developer w...

    Neil Pavier: Management Accountant

    £45,000 - £55,000: Neil Pavier: Are you looking for your next opportunity for ...

    Sheridan Maine: Commercial Accountant

    £45,000 - £55,000: Sheridan Maine: Are you a newly qualified ACA/ACCA/ACMA qua...

    Laura Norton: Project Accountant

    £50,000 - £60,000: Laura Norton: Are you looking for an opportunity within a w...

    Day In a Page

    Abuse - and the hell that came afterwards

    Abuse - and the hell that follows

    James Rhodes on the extraordinary legal battle to publish his memoir
    Why we need a 'tranquility map' of England, according to campaigners

    It's oh so quiet!

    The case for a 'tranquility map' of England
    'Timeless fashion': It may be a paradox, but the industry loves it

    'Timeless fashion'

    It may be a paradox, but the industry loves it
    If the West needs a bridge to the 'moderates' inside Isis, maybe we could have done with Osama bin Laden staying alive after all

    Could have done with Osama bin Laden staying alive?

    Robert Fisk on the Fountainheads of World Evil in 2011 - and 2015
    New exhibition celebrates the evolution of swimwear

    Evolution of swimwear

    From bathing dresses in the twenties to modern bikinis
    Sun, sex and an anthropological study: One British academic's summer of hell in Magaluf

    Sun, sex and an anthropological study

    One academic’s summer of hell in Magaluf
    From Shakespeare to Rising Damp... to Vicious

    Frances de la Tour's 50-year triumph

    'Rising Damp' brought De la Tour such recognition that she could be forgiven if she'd never been able to move on. But at 70, she continues to flourish - and to beguile
    'That Whitsun, I was late getting away...'

    Ian McMillan on the Whitsun Weddings

    This weekend is Whitsun, and while the festival may no longer resonate, Larkin's best-loved poem, lives on - along with the train journey at the heart of it
    Kathryn Williams explores the works and influences of Sylvia Plath in a new light

    Songs from the bell jar

    Kathryn Williams explores the works and influences of Sylvia Plath
    How one man's day in high heels showed him that Cannes must change its 'no flats' policy

    One man's day in high heels

    ...showed him that Cannes must change its 'flats' policy
    Is a quiet crusade to reform executive pay bearing fruit?

    Is a quiet crusade to reform executive pay bearing fruit?

    Dominic Rossi of Fidelity says his pressure on business to control rewards is working. But why aren’t other fund managers helping?
    The King David Hotel gives precious work to Palestinians - unless peace talks are on

    King David Hotel: Palestinians not included

    The King David is special to Jerusalem. Nick Kochan checked in and discovered it has some special arrangements, too
    More people moving from Australia to New Zealand than in the other direction for first time in 24 years

    End of the Aussie brain drain

    More people moving from Australia to New Zealand than in the other direction for first time in 24 years
    Meditation is touted as a cure for mental instability but can it actually be bad for you?

    Can meditation be bad for you?

    Researching a mass murder, Dr Miguel Farias discovered that, far from bringing inner peace, meditation can leave devotees in pieces
    Eurovision 2015: Australians will be cheering on their first-ever entrant this Saturday

    Australia's first-ever Eurovision entrant

    Australia, a nation of kitsch-worshippers, has always loved the Eurovision Song Contest. Maggie Alderson says it'll fit in fine