Post-mutual shelter

Tens of thousands of members of de-mutualising building societies and insurance companies have been told that no matter how many shares they receive, they will be able to protect them against tax by placing them in a PEP wrapper.

The Inland Revenue's decision means that multiple-flotation shareholders, members of the Halifax and Alliance & Leicester, plus Norwich Union, for instance, will be able to shelter their shares in one PEP. Furthermore, the Revenue has said it will still be possible for individuals to hold an additional general PEP up to its pounds 6,000 maximum, and a separate single- company PEP holding a further pounds 3,000 in shares.

The decision is a boost not just to so-called carpetbaggers, those who deliberately opened building society accounts in the hope of benefiting from the free shares bonanza unleashed last year. Some industry estimates suggest that in addition to speculators with multiple accounts, there are likely to be hundreds of thousands of with-profits policyholders with Scottish Amicable and Norwich Union who have also taken out separate mortgages through one of the large de-mutualising societies.

To benefit from the Revenue's concession, it is necessary only to open a general PEP within 42 days of the first share allocation being received. Thereafter, any additional shareholdings can simply be placed in the same PEP, going beyond the pounds 6,000 limit if the shares were part of a free handout.

However, a policyholder who only expects to receive a single allocation of shares and has little stomach for adding to his or her portfolio by buying other companies' shares, is probably still better off by opting for one of the single-company PEP wrappers that will be on offer from the building societies and insurers that are demutualising.

Among the companies offering PEP wrappers for multiple shareholdings are ShareLink, which levies no costs to transfer building societies into a PEP. But there is a pounds 4 quarterly charge for general PEPs. Dealwise will levy a pounds 15 annual charge. Hargreaves Lansdown will levy a pounds 15 annual charge if the shares are added to an existing PEP, pounds 30 if a new PEP is created. Perpetual, a fund manager, is prepared to add flotation shares to its own PEP, but will charge pounds 4 per dividend payment, fees of pounds 8 per annum.

Dealwise, 0113 244 4095; Hargreaves Lansdown, 0800 850661; Killik & Co, 0171 461.4500; Perpetual, 01491 417000; ShareLink, 0121 2002242; NatWest, details in all branches, PEP Direct 0800 413186.

The Independent has produced a free 32-page Guide to PEPs, sponsored by GA Life. For a copy call 0500 125888, or fill in the coupon (right)

Independent Partners; Do you need financial advice on your investments, pension or insurance? Book a free consultation with an independent Financial Adviser at VouchedFor.co.uk

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