The right time for a PEP talk - Spend & Save - Money - The Independent

The right time for a PEP talk

Move quickly to make the most of this year's Personal Equity Plan allowances

The tax clock starts ticking on Tax-Exempt Savings Schemes on the day you open the account and ticks on for the next five years oblivious of the intervening tax years, before you can take your interest away tax free, so there is no rush to start a Tessa in the next few days. But Personal Equity Plans (PEPS) and their younger cousins Corporate Bond PEPS are regulated by the tax year.

Anyone over the age of 18 can put up to pounds 6,000 in a general PEP or a general Corporate Bond PEP containing a range of individual shares or bonds, plus pounds 3,000 into a PEP invested in the shares of a single company or the bonds of a single company. The package can be from a PEP provider who is usually a bank, building society, stockbroker, investment trust or unit trust manager. They provide standard packages of eligible shares or units for a PEP (or fixed-interest bonds for a Corporate Bond PEP), and ensure they are placed in a PEP "wrapper" to make sure that as long as they are held the investor will not be liable to income tax on the dividends or capital gains tax on the proceeds.

The tax incentives are attractive to basic rate taxpayers and doubly attractive to higher rate taxpayers and those who make capital gains in excess of their annual allowances. There is no need even to declare the income or the investment on tax forms.

PEPS and their Corporate Bond cousins can be bought at any time of the year and the tax benefits begin immediately. Each year investors can add to their holdings, and 10 years after they were first introduced there is still no sign of this government introducing a ceiling.

But unused PEP allowances cannot be carried forward from one tax year to the next and anyone who fails to invest before April 4 will have lost the opportunity, for 1995-96 at least. Investors can also switch their PEP from one manager to another at this time of year. Many PEP providers are also offering investors the chance to invest this year's and next year's allowances almost simultaneously. So especially at this time of year there is no shortage of advertisements extolling the praises of individual PEPS, especially those based on existing investment or unit trusts which can show an impressive investment track record.

Investors can choose between High Income PEPS, Growth PEPS and Tracker PEPS, which make a virtue of following one of the main stock market indices as closely as possible. They can invest in unit trusts and in investment trust PEPS, provided the managers in turn invest in a majority of shares listed on the UK or EU stock exchanges, and they can invest in Corporate Bond PEPS provided they invest in bonds denominated in sterling and issued by UK based companies.

They can even find a guaranteed income PEP on offer from GAN insurance which offers a guaranteed return of capital, and 4 per cent tax-free income, plus a further 4 per cent if the 100 share index has not fallen between 8 March one year and the next. Providers such as Legal & General and Johnson Fry have also packaged their own bonds to provide a guaranteed income on their Bond PEPS.

Alternatively the investor can approach a stockbroker and choose his own shares for a Self-Select PEP, which the broker will then take care of, buying and selling shares and collecting tax rebates on the dividends in return for fees.

Investors can only have one PEP or Corporate Bond PEP per year and six out of 10 investors make a single annual investment, although small investors will easily find a number of providers who are willing to accept regular monthly contributions to a PEP.

Independent Partners; request a free guide on NISAs from Hargreaves Lansdown

Life and Style
tech
Arts and Entertainment
Robin Thicke's video for 'Blurred Lines' has been criticised for condoning rape
music
News
Paper trail: the wedding photograph found in the rubble after 9/11 – it took Elizabeth Keefe 13 years to find the people in it
newsWho are the people in this photo? It took Elizabeth Stringer Keefe 13 years to find out
Arts and Entertainment
Matt Damon as Jason Bourne in The Bourne Ultimatum (2007)
filmMatt Damon in talks to return
PROMOTED VIDEO
Arts and Entertainment
Evil eye: Douglas Adams in 'mad genius' pose
booksNew biography sheds light on comic genius of Douglas Adams
Life and Style
Bono and Apple CEO Tim Cook announced U2's surprise new album at the iPhone 6 launch
tech(but you can't escape: Bono is always on your iPhone)
Sport
FootballFull debuts don't come much more stylish than those on show here
Arts and Entertainment
Fringe show: 'Cilla', with Sheridan Smith in the title role and Aneurin Barnard as her future husband Bobby Willis
tvEllen E Jones on ITV's 'Cilla'
News
i100
Sport
Tim Wiese
sport
Life and Style
Kim Kardashian drawn backlash over her sexy swimsuit selfie, called 'disgusting' and 'nasty'
fashionCritics say magazine only pays attention to fashion trends among rich, white women
Arts and Entertainment
TVShows like Agents of S.H.I.E.L.D are little more than marketing tools
Arts and Entertainment
Hit the roof: hot-tub cinema east London
architectureFrom pools to football pitches, rooftop living is looking up
Travel
travel
News
The ecological reconstruction of Ikrandraco avatar is shown in this illustration courtesy of Chuang Zhao. Scientists on September 11, 2014 announced the discovery of fossils in China of a type of flying reptile called a pterosaur that lived 120 millions years ago and so closely resembled those creatures from the 2009 film, Avatar that they named it after them.
SCIENCE
Finacial products from our partners
Property search
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

    Payroll & Accounts Assistant

    £20 - 24k + Benefits: Guru Careers: This is a great opportunity for an enthusi...

    SQL Developer - Watford/NW London - £280 - £320 p/d - 6 months

    £280 - £320 per day: Ashdown Group: The Ashdown Group have been engaged by a l...

    Senior BA - Insurance **URGENT**

    £400 - £450 Per Day: Clearwater People Solutions Ltd: **URGENT CONTRACT ROLE**...

    Training Coordinator / Resource Planner - City, London

    £35000 - £38000 per annum + Benefits: Ashdown Group: Training Coordinator / Pl...

    Day In a Page

    Mystery of the Ground Zero wedding photo

    A shot in the dark

    Mystery of the wedding photo from Ground Zero
    His life, the universe and everything

    His life, the universe and everything

    New biography sheds light on comic genius of Douglas Adams
    Save us from small screen superheroes

    Save us from small screen superheroes

    Shows like Agents of S.H.I.E.L.D are little more than marketing tools
    Reach for the skies

    Reach for the skies

    From pools to football pitches, rooftop living is looking up
    These are the 12 best hotel spas in the UK

    12 best hotel spas in the UK

    Some hotels go all out on facilities; others stand out for the sheer quality of treatments
    These Iranian-controlled Shia militias used to specialise in killing American soldiers. Now they are fighting Isis, backed up by US airstrikes

    Widespread fear of Isis is producing strange bedfellows

    Iranian-controlled Shia militias that used to kill American soldiers are now fighting Isis, helped by US airstrikes
    Topshop goes part Athena poster, part last spring Prada

    Topshop goes part Athena poster, part last spring Prada

    Shoppers don't come to Topshop for the unique
    How to make a Lego masterpiece

    How to make a Lego masterpiece

    Toy breaks out of the nursery and heads for the gallery
    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Meet the ‘Endies’ – city dwellers who are too poor to have fun

    Urbanites are cursed with an acronym pointing to Employed but No Disposable Income or Savings
    Paisley’s decision to make peace with IRA enemies might remind the Arabs of Sadat

    Ian Paisley’s decision to make peace with his IRA enemies

    His Save Ulster from Sodomy campaign would surely have been supported by many a Sunni imam
    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    'She was a singer, a superstar, an addict, but to me, her mother, she is simply Amy'

    Exclusive extract from Janis Winehouse's poignant new memoir
    Is this the role to win Cumberbatch an Oscar?

    Is this the role to win Cumberbatch an Oscar?

    The Imitation Game, film review
    England and Roy Hodgson take a joint step towards redemption in Basel

    England and Hodgson take a joint step towards redemption

    Welbeck double puts England on the road to Euro 2016
    Relatives fight over Vivian Maier’s rare photos

    Relatives fight over Vivian Maier’s rare photos

    Pictures removed from public view as courts decide ownership
    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    ‘Fashion has to be fun. It’s a big business, not a cure for cancer’

    Donatella Versace at New York Fashion Week