Countdown to the PEPs that are top of the pops

Clifford German charts the best of the performers in Personal Equity Plans
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The Independent Online
Personal Equity Plans sold like hot cakes in the second half of the last financial year, replacing Tessas as the most popular investment for those investors who have been watching bond and share prices rise and interest rates on savings accounts fall.

According to the brokers BESt investment, PEP sales rocketed to a record pounds 6.8bn in 1995-96, up nearly 25 per cent on 1994-95, although at the half-way mark last October they were still 15 per cent down on the previous year.

BESt believes that the main reason for the leap was the introduction of Corporate Bond PEPS investing in high-yielding loan stocks instead of shares. They grossed pounds 1.2bn from a standing start, and accounted for 19 per cent of the entire PEP market.

But the modest returns offered on new Tessas must have persuaded some investors with Tessas maturing from January onwards to chase the prospects of capital gains and ignore the possibility of losing some of their capital in a PEP.

PEP providers also deserve some of the credit for reducing or even abolishing their front-end charges, which in the past offset much of the advantages of tax-free income and capital gains from a PEP, at least for investors who would only be liable for standard rate tax and were unlikely to incur capital gains anyway. Most index-tracker funds in particular are now low- cost.

The PEP business is still dominated by the big groups with wide distribution networks, but there are signs that the best performing managers, including Perpetual, Schroders and Morgan Grenfell, who sell mainly through independent financial advisers are gaining ground. All three have a strong fund performance and wide range of funds on offer, says BESt's Jason Hollands.

Perpetual attracted pounds 678m, and nudged M&G into second place in 1995-96 in spite of M&G successful corporate bond PEP. Barclays and Lloyds occupied the next two places but Schroders just edged Fidelity out of fifth place, and Virgin Direct grossed pounds 232m in its first full year. Legal & General, TSB and Morgan Grenfell also came into the Top 10.

Commercial Union rose to 15th place thanks to their Corporate Bond PEP which took in pounds 110m, Johnson Fry and Jupiter also came from nowhere. Midland Bank, NatWest, Save & Prosper and Bradford & Bingley slipped down the league.

BESt is offering a copy of its BESt PEP magazine free to readers who write in to 20, Mason's Yard, Duke Street, London SW1Y 6BU.

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