The charges will replace the usual 5 to 6 per cent initial charge which is the industry standard for most funds.
The exit charge would be staggered, so that those investors that encashed their units in the first year would be subject to the biggest charge while those that hold on to their units for more than five years would in effect only pay the annual management charge. This would mean a cost saving of about pounds 300 on an average pounds 6,000 investment.
M&G's plan follows consultative rules from the Securities and Investments Board on the charging structure of unit trusts.
Jeffrey Mushens, M&G's head of direct distribution, said: 'We have to have a close look at the regulations before we change the charge.'
He added that once the fine detail had been sorted out he would expect the company to be able to introduce the new charge on one of the funds - the managed income fund - by September.
Earlier in the year M&G started a price war in personal equity plans by scrapping the front-end charge on its managed income PEP and adding an exit charge.
Its move was followed by a round of price cutting by other PEP providers.Reuse content