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NOT everyone wants a standard managed PEP in equities or bonds, and for those who want something a little different there is a widening choice.

The venture capital group 3i is offering investors a PEP that invests in 3i shares. Although it is strictly a general PEP, it has only become possible under the corporate-bond legislation, because so many of 3i's equity investments have actually been in preference rather than ordinary shares, and a small shift in its portfolio could have disqualified a 3i PEP until now. Its target yield is only 2-2.5 per cent, but it has already built up a following.

Gartmore Shaw is offering investors the chance to "wrap" a PEP around its UK utilities fund, which invests in the privatised gas, electricity and telecom shares. Bradford & Bingley is offering a PEP investing in Lasmo shares. Thornton is offering a PEP that invests in high-yielding preference shares. Legal & General has fluttered the dovecotes by issuing a single-company bond PEP, which will invest in bonds specially issued for the purpose by the insurance company itself with low charges and a guaranteed yield. Johnson Fry has done a similar deal, also backed by a guaranteed return.

Stockbrokers and execution-only dealers are also pulling in customers who want to self-select their own PEP investments with tempting low-cost deals. The Manchester-based Pilling makes pounds 30 flat initial charge, plus pounds 6.75 per holding to claim back tax on interest payments. With these payments issued twice a year, sometimes once, charges on a one-stock cost just pounds 43.50 in year one. A further 0.5 per cent stamp duty is payable on all purchases, but it is still a lot less than the charges on a managed PEP.

Self-select bond PEPs work in much the same way as the equity self-select PEP. The investor chooses the underlying investment(s) for him or herself, which is then placed in a PEP by a broker. The underlying investments can be any share or fixed-interest security allowed under Inland Revenue rules.

Advice on which underlying investments to choose is available from private client stockbrokers such as Killik and Quilter Goodison. Hargreaves Lansdown is PEP-wrapping single-company bonds issued by four FT-SE 100 companies - Hanson, Glaxo, Royal Insurance and British Gas. If no advice is needed, and investors have a sound knowledge of the products on the market, they should seek an execution-only service, such as Sharelink or Citydeal.

Hargreaves Lansdown imposes a minimum investment of pounds 3,000. Others do not have a formal lower limit, but are in effect restricted by the way the securities are batched up into lots. These can be sold in sets of 1,000 or 5,000 or more. Usually these lots cannot be divided up.

To those who already own fixed-interest securities, Sharelink is offering a low-cost PEP packaging deal, where they can sell their newly qualifying stock and then repurchase it back into a PEP, for a fixed fee of pounds 10.

Matthew Orr, partner at Killik, recommends self-select corporate PEPs over collective investments, because punters always know exactly the return they will receive. Investors buying bond unit trusts today yielding 8 per cent may find their income diluted if more money flows into the unit trust after they invest and bond yields fall.

Mr Orr also issues a warning, about the type of convertible loan stock where the company concerned has a call option. This means they can call in the stock and only reimburse customers at par (the end-of-term redemption price). This means that such shares could be called in before five years are up, which may disqualify them from inclusion in Corporate Bond PEPs, under Inland Revenue rules. One example is the Hanson bond dated 2003, which could be redeemed early, inflicting a small loss on holders. "If in doubt, keep out," said Mr Orr.

Another note of caution is sounded by Peter Hargreaves of Hargreaves Lansdown. People should check that the company they choose for their self- select Corporate Bond PEP offers Eurobonds, as well as UK-traded securities. Eurobonds make up over half the PEP-qualifying products and tend to be more liquid, cheaper, and have better yields. But some companies, including Sharelink, do not deal in them. Citydeal does not as yet, but may in the near future.

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