Pick 'n' mix portfolios
Saturday 15 February 1997
The idea was that people would buy shares through stockbrokers and hold them in PEPs, rather than directly, so escaping tax on the earnings.
In this way, reasoned the experts, the public, busy buying into privatisations such as British Airways, would support wider share ownership - and thus, as one commentator put it, "become increasingly engaged by capitalism".
Of course, it hasn't exactly turned out that way. As the rules have changed over the years to allow investors to put the full PEP allowance into managed funds, the original concept of a tax shelter for individual share stakes has been overshadowed by the billions pouring into the packaged investment products.
But for those who want to build their own portfolio, the self-select PEP still has strong attractions. The annual limits - broadly, no more than pounds 6,000 in a general PEP plus a further pounds 3,000 in a single company plan - still apply, and the tax benefits are the same, but the mechanics are slightly different from the packaged product.
You still need a PEP manager - a bank or broker who is authorised to collect and pay your earnings tax-free - and this has to be paid for.
There are not normally any set-up charges, but there are annual charges, and you have to pay dealing charges on each transaction.
Annual charges can range from less than pounds 50 to pounds 250, so it pays to look carefully, and there are also variations in dealing costs. The largest managers of self-select PEPs are Barclays, Lloyds and ShareLink, all of which offer special rates for share stakes being bought into a PEP.
Lloyds Bank's Choice PEP, for example, offers what's probably the cheapest share dealing service in the country at just half of 1 per cent - a third of normal commissions. But there are a couple of snags.
This special rate applies only to 150 of the most popular shares and your orders will be "bulked" with those of other customers, and dealt only on alternate Thursdays. So this service would not really be suitable for volatile shares, or at times of uncertainty in the markets generally.
If you want normal "best price" dealing for your PEP, Lloyds' standard rates are 1.5 per cent, with a minimum of pounds 18.50 and a maximum of pounds 75.
ShareLink charges a similar 1.5 per cent commission, but the minimum and maximum rates are pounds 20 and pounds 37.50 - and you can also use their PEP to subscribe to new issues for an extra charge of pounds 10.
Active investors should take the time to study the company's annual report and accounts - and might consider attending the annual meeting. ShareLink charges pounds 10 for these services and some operators charge more.
You can also use a self-select PEP to shelter existing share stakes - by having your broker sell them and then buy them back into the plan. The process is similar to the "bed and breakfast" share sales and repurchase deals used to crystallise capital gains, and so have become known as "bed and PEP" deals. But you need to think it through: will the costs outweigh the tax saving? Indeed, will the initial sale take you over the limits for capital gains tax?
An alternative way to "tidy up" small share stakes or unit trust holdings is to use a share exchange scheme in which a PEP manager sells your shares and invests the proceeds in a managed fund.
Sales of the tablet are set to fall again say analysts
World's most lethal spider found under a bunch of bananas
Rumours that the star wants to move on to pastures new
Comedian says he 'never laughed as hard as I have writing with Rik'
17 October 2014 07:08 PM
Going down the wrong road: parking fines are nudging people into debt difficulties
17 October 2014 07:58 PM
Stacks of income: Drax is among the companies in Neil Woodford’s portfolio that he believes will pay strong dividends
17 October 2014 07:23 PM
Don't panic, it’s a wise idea to check investments regularly to ensure they are on target for your hoped-for returns
17 October 2014 08:18 PM
With little or no wage growth being seen in the UK, increasing house-price inflation could see the number of first-time buyers slide further, unless there’s a new accelerated house building programme
17 October 2014 07:19 PM
You should ignore the headline offers and trickery and work out the total cost of borrowing under different deals
17 October 2014 07:24 PM
Denise Leigh, who appeared in a production of Rigoletto with Alan Opie, was left without an essential service
10 October 2014 06:13 PM
A charity has calculated the cost to us all of unmanageable debt – from lost productivity to the extra demands on the NHS
10 October 2014 06:36 PM
The regulators are at last tackling the high-profile payday lenders, but they appear to be ignoring the growing problem of internet loan firms
10 October 2014 06:35 PM
As the cold weather hits, the question of soaring bills will be felt by each of us at home
10 October 2014 06:55 PM
Nikki Galloway (above) sells jewellery via her own website as well as on Facebook, Amazon and Bouf
10 October 2014 07:17 PM
Queenstown on Lake Wakatipu in New Zealand. The country’s stock market was boosted last month on John Key’s re-election
10 October 2014 07:29 PM
Royal Mail is cutting its small parcel charges from 20 October
03 October 2014 07:08 PM
Anyone who moved to countries including Australia, Canada, South Africa and a 100 other places, have had their pensions frozen at the rate it was paid at when they left the country
03 October 2014 06:52 PM
Every fund has good years and bad, but consistent underperformance over a number of years points to something more fundamental
03 October 2014 07:38 PM
Nick Train thinks luxury fashion brand Burberry is one of the companies that has prospered in digital marketing
The HiFX guide to international money transfers
Mark Dampier: Woodford’s young companies could be the stars of the future
Charges related to car parking rising and leading to serious money woes
Money Insider: Help to Buy must be boosted by building
Weekly Money: Round-up of the personal finance stories you may have missed 13-17 October
- 1 Jack the Ripper: Scientist who claims to have identified notorious killer has 'made serious DNA error'
- 2 Ebola outbreak: What is bushmeat – and is it to blame for the disease that has killed thousands?
- 3 Star Wars memorabilia called a 'bit of plastic' on Antiques Roadshow by Fiona Bruce valued at £50,000
- 4 Meet Thea, Norway's 12-year-old child bride
- 5 Russell Brand might seem like a sexy revolutionary worth getting behind, but he will only fail his fans
Cameron is warned 'no possibility' of UK reducing immigration and that bid to bring in quota on migrant workers would be illegal
Sorry Judy Finnigan – Ched Evans is no less sickening than an alleyway rapist
Residents should throw a street party and mix with immigrant neighbours, councils told
Workers 'could be forced to pay £5 a week' to get benefits
Russell Brand threatened with arrest after filming outside Fox News headquarters
Amal Alamuddin calls for the return of the Elgin Marbles from Britain: 'Injustice has persisted for too long'
iJobs Money & Business
£60 - 65k + Benefits: Guru Careers: We are seeking a ASP.NET Web Developer / ....
£60,000 - £80,000: Saxton Leigh: Our client is an leading Asset Manager based...
£27000 - £32000 Per Annum: Clearwater People Solutions Ltd: Our large charity ...
£50000 - £55000 per annum + bonus + benefits: Ashdown Group: IT Relationship M...
Day In a Page
This 17th century beauty is full of rustic cosiness, while the detached home office means you can also run a business
This five-bedroom red-brick beauty overlooks the village green and sits in just under two acres of land
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
A one-bedroom, luxury apartment with private gym and concierge service in Moorgate
A four-bedroom house in Hermitage Gardens with three reception rooms and landscaped gardens
A seven-bedroom Grade II-listed property with a separate self-contained apartment
A five-bedroom Victorian house with three reception rooms and galleried landing, £695,000
A six-bedroom farmhouse with five acres of land in a former cloth-making village