Act now and reap the rewards

Don't wait till April to find a PEP, says Isabel Berwick

IT IS TIME to sort yourself out with a personal equity plan. With lots of good offers around, there is no point leaving a decision until next year, especially if you want to invest monthly rather than through a lump sum of up to pounds 6,000.

If you choose a PEP this week and start to invest pounds 100 a month, you will have pounds 800, plus any gains, in a tax-free pot by the time PEPs are scrapped next April.

People who have existing PEPs will be able to keep them to grow tax- free as long as they leave the money invested. And if your PEP does not perform in future years, you will be able to transfer it elsewhere.

Even so, the 1998/99 PEP season is forecast to be the biggest ever, and discount PEP brokers have already reported record business over the summer holidays. Many investors seem to be worried about individual savings accounts (ISAs), which come into effect next April, and are piling into PEPs while they can.

You can start a PEP with modest amounts of money. A few big names, including Perpetual, will take a minimum of just pounds 20 a month, although many managers demand at least pounds 50.

There are more than 800 PEPable unit and investment trust funds, so there is some element of chance to all this. But if you are prepared to spend an hour doing some research, you won't end up with a dud PEP.

First, decide whether you want your assets to be invested in the UK, in Europe or further afield. You will only get a partial PEP allowance of pounds 1,500 for global funds, but this is useful for regular investors who can put pounds 125 a month into a global PEP fund. You may also want to look at corporate bond PEPs, which offer a fixed-interest investment in company bonds.

In the current economic climate, bonds look increasingly attractive.

Then narrow the choice to a few funds that have been consistent performers in your favoured sectors. (See the box for advisers' tips.) At this stage it is worth calling the PEP broking firms (see panel) for their welcome packs as they contain useful performance information and details of discounts and special offers.

If you want more information, send for literature about your shortlist from the managers, and then make a decision. If you choose your own PEP, you can buy through a discount broker, which will rebate you most of its commission. This is usually about 3 per cent of your investment - pounds 180 on a pounds 6,000 PEP. However, not all PEP discounters will offer you such a deal.

If you want some guidance, a good independent financial adviser (IFA) will be able to suggest funds to suit your circumstances. Unless you choose a fee-based adviser, costing pounds 100 or more an hour, the IFA will usually take commission as payment, so effectively you are paying pounds 180 in most cases for the advice. (See below on finding a financial adviser.)

If you buy a PEP direct from the provider, you will have to pay the full initial charge, usually about 5 per cent, which includes commission and management fees for setting up the plan. So if you aren't comfortable making your own choices, pounds 180 is a small price to pay for peace of mind.

Never go to the bank and buy what they suggest. Banks can only sell their own PEPs and many of them are mediocre performers. Take the bank's advice if you wish, but compare its offering with what you can buy on the open market.

Few people want to take a chance on Asia, but some advisers believe these markets offer bargains for the brave.

Brian Dennehy, from Dennehy, Weller & Co, in Kent, says: "There are some cracking investment trust funds trading at a 15-20 per cent discount. A number of the big names have Far Eastern investment trusts including Fidelity, Perpetual and Schroder."

But to be fashionable, look to the big European funds. Financial Discounts Direct reports that four out of 10 customers are buying European PEPs, with funds from Invesco, Jupiter and Gartmore the most popular buys.

Traditionally, Europeans have been heavily invested in bonds, but as interest rates fall across Europe in readiness for the "smoothing" effect of EMU, bond yields are pushed down and investors are buying shares to try to get bigger returns.

There is a strong case for UK investors to move in the opposite direction and buy bonds. Interest rates in the UK are high in European terms and even when (rather than if) interest rates fall, the capital value of bonds will go up. So it is a win-win situation.

You can use your PEP allowance to buy a fixed-interest corporate bond PEP. These funds buy bonds and other fixed-interest shares, mainly from blue-chip companies and are currently offering a return of 6-7 per cent a year, which is tax-free in a PEP.


: Telephone % Rate and Max Fee Incentive Redemption period adv % penalty


Fixed rates

Scarborough BS 0990 133149 1.25% for 1 year 95% 0.75% adv up to 80%, free MIP 1st 6 yrs:7.69% of sum repaid

Lambeth BS 0800 225221 4.64% to 1.7.00 75% pounds 295 1st 6 yrs: 5% of adv. repaid

Northern Rock 0845 6050500 5.89% to 1.1.04 95% 1% adv up to 85%, no MIP 1st 7yrs: 3-5% sum repaid

Variable discounted rates

Principality BS 0800 163817 4.65% to 1.11.00 80% pounds 295 no high lending fee To 1.11.03; discount reclaimed Nationwide BS 0800 302010 6.45% for 3 years 90% pounds 295 no high lending fee 1st 5 yrs: ind. determined

Coventry BS 0345 665522 6.95% to 30.9.03 95% pounds 295 adv. up to 90%, no MIP To 30.9.03, 9 mths interest

First-time buyers fixed rates

Northern Rock 0845 6050500 4.59% to 1.1.01 95% 1% adv. up to 85%, no MIP 1st 6 yrs, 3-5% of sum repaid

FirstMortgage 0800 080088 5.85% to 31.8.01 90% pounds 295 free high lending fee to 31.8.03: 5% of advance

Scarborough BS 0990 133149 6.15% for 5 years 95% pounds 395 1st 7 yrs: 6 mths interest

First-time buyers variable rates

Coventry BS 0345 665522 4.35% to 30.9.00 95% pounds 295 adv up to 90%, no MIP to 30.9.03:6-12mths interest

FirstMortgage 0800 080088 5.59% to 31.8.01 90% pounds 295 to 28.02.03: 5% of interest

Nationwide BS 0800 302010 7.25% for 5 yrs 95% pounds 295 Refund valuation fee 1st 5 yrs: ind. determined


Telephone APR % Fixed monthly payments (5k over 3 years)

Unsecured With insurance Without insurance

Northern Rock 0345 421421 9.9%H pounds 183.14 pounds 165.56

Direct Line 0181 680 9966 12.8% pounds 183.75 pounds 166.38

Royal Bank Scot 0800121125 12.8%A pounds 188.15 pounds 166.38

Secured (second charge) Max LTV Advance Term

Clydesdale Bank 0800 240024 9.3% Neg pounds 3K to pounds 15K 6 mths to 25 years

Chartered Trust 01222 296000 9.9% 100% pounds 20K-pounds 25K 1 - 7 years

Royal Bank Scot 0800 121121 11.2% 70% pounds 2.5K to pounds 100k 3 yrs - retirement


Authorised Unauthorised

Telephone Account % pm APR % pm APR

Alliance & Leicester 0500 959595 Alliance 0.95% 12.00% 2.20% 29.8%

Bank of Scotland 0500 804804 Direct Cheque- 11.0%- 26.5%

Nationwide BS 0500 302010 Flexaccount 0.97% 12.2% 2.10% 28.3%


Telephone Card Type Min Rate APR Annual Income % pm % Fee period


Capital One Bank 0800 669000 Visa - 0.565%N 6.90%N nil 54 days

RBS Advanta 0800 077770 Visa - 0.64%N 7.90%N nil 56 days

Nationwide BS 0500 302011 Visa - 0.68%N 8.50%N nil 52 days

Gold cards

Capital One Bank 0800 669000 Visa pounds 20,000 0.565%N 6.90%N nil 54 days

Co-operative Bank 0345 212212 Base Rate Visa pounds 20,000 0.63% 12.25% pounds 120 46 days

RBS Advanta 0800 077770 Visa pounds 20.000 0.64%N 7.90%N nil 56 days


Telephone Payment by direct debit Payment by other methods % pm APR % pm APR

John Lewis via store 1.39 18.0 1.39 18.0

Bhs via store 1.95 26.0 2.15 29.0

Marks and Spencer 01244 681681 1.97 26.3 2.07 27.8

APR - Annualised percentage rate. A - Direct debit only. H.- Higher rate applies if insurance not arranged

N - Introductory rate for a limited period.

All rates subject to change without notice. Source: MONEYFACTS 01603 476747 20 August 1998





Clydesdale Bank 0800 445265 Savings Instant pounds 1 6.75% Qly

Woolwich 0800 222200 Card Saver Instant pounds 50 6.75% Year

Stroud & Swindon 0345 413853 Branch Instant Instant pounds 100 6.00% Year Leeds & Holbeck 0500 225777 Premium Access Instant pounds 5,000 7.00% Year


Standard Life Bank 0345 555657 Direct Access Instant (T) pounds 1 7.35% Year

C & G 0800 742437 Instant Transfer Instant (T) pounds 1,000 7.50% Year

Northern Rock 0845 6006767 Save Direct Instant Instant(B) pounds 5,000 7.80% Year

SAGA ( for over 50s) 0800 514515 Postal Savings Postal pounds 10,000 7.90% Year


Scarborough BS 01723 500616 Scarborough 50 30 Day pounds 1,000 7.60% Year

Chelsea BS 0800 132351 Post-tel 40 40 Day (B) pounds 5 ,000 7.80% Year

Standard Life Bank 0345 555657 50 Day Notice 50 Day (T) pounds 1 7.55% Year

Legal & General Bank 0500111200 60 Direct 5 60 Day (B) pounds 10,000 8.00% Year


Investec Bank (UK) 0171 2031650 HICA 5000 Instant pounds 5,000 6.60% Month

AMC 0181 447 2040 HICA Instant pounds 5,000 6.75% Qly

Halifax 0113 235 6220 Asset Reserve Instant pounds 10,000 5.70% Qly

Chelsea BS 0800 429429 Classic Postal Instant pounds 10,000 5.95% Year


Norwich&P'boroughBS 0800 883322 Fixed Rate Bond 6 month pounds 5,000 7.50% OM

Woolwich via branch Fixed Rate Bond 1 year pounds 500 8.00% Year

Northern Rock 0845 600 4466 Fixed Rate Bond 31.8.99 pounds 5,000 7.85% Year

Nottingham BS 0800 915011 Fixed Rate Investm. 1.7.00 pounds 2,500 7.50% Year


Norwich&P'boroughBS 0800 883322 5 year pounds 100 8.25% Year

Principality BS 01222 344188 5 year pounds 2,500 8.20% Year

Lambeth BS 0800225221 5 year pounds 3,000 8.10% Year

Yorkshire BS 0800 378836 5 year pounds 100 8.05% Year


Barclays Bank 0800 400100 5 year pounds 9,000 8.50% Year

Sun Bank 01438 744505 5 year pounds 9,000 8.30% Year

Norwich & P'borough 0800883322 5 year pounds 100 8.25% Year

Furness BS 0800 220568 5 year pounds 9,000 8.25% Year


Pinnacle Insurance 0181 207 9007 1 year pounds 3,000 5.80%FN Year

ITT London & Edin 01903 820820 2 year pounds 3,000 5.70%FN Year

ITT London & Edin 01903 820820 3 year pounds 3,000 5.70%FN Year

Hambro Assured 0800 838020 4 year pounds 10,000 5.65%FN Year

Pinnacle Insurance 0181 207 9007 5 year pounds 3,000 5.80%FN Year


Britannia Intl 01624 681168 Capital Wise Direct Instant pounds 10,000 7.60% Year

Bristol & West Intl 01179 807072 Instant Access Instant pounds 50,000 7.85% Year

FirstNationalBSGuern 01481710400 60 Day Notice 60 Day pounds 10,000 7.80% Year

Britannia Intl.Ltd 01624 681100 90 Day Notice 90 Day pounds 10,000 7.85% Year


Investment accounts 1 month pounds 20 5.00 Year

pounds 500 5.35 Year

pounds 2,500 5.70 Year

pounds 5,000 5.95 Year

pounds 10,000 6.20 Year

pounds 25,000 6.45 Year

pounds 50,000 7.00 Year

Income bonds 3 month pounds 2,000 7.25 Month

pounds 25,000 7.50 Month

Capital bonds Series L 5 year pounds 100 6.00F Maturity

FIRST Option bonds 12 month pounds 1,000 6.75F Year

pounds 20,000 7.00F Year

Pensioners guaranteed income bond Series 5 5 year pounds 500 6.10F Month

NS certificates (tax free) 46th issue 5 year pounds 100 4.80F Maturity

13th index-linked 5 year pounds 100 2.25F+rpiMaturity

Children's bonds (tax-free) Issue J 5 year pounds 25 8.00F Maturity

B - branch. F - fixed rate. N - net rate. T - telephone. All rates are shown gross and are subject to change without notice Source: MONEYFACTS 01603 476747 20 August 1998

Popular Peps

These are the most favoured PEP investment sectors (July figures)

1. Europe 39.8 per cent

2. Corporate bonds 18.5 per cent

3. UK growth 10.9 per cent

4. UK income 7.6 per cent

Source: Financial Discounts Direct


Barclays Global Investors Gilt and Fixed Income PEP: monthly investment min pounds 50 monthly: 0345 585599. Lump sum investments pounds 1,000 plus: 0800 731 2443

Commercial Union Monthly Income Plus PEP: min pounds 25 monthly, pounds 500 lump sum: 0845 607 2439

Fidelity: all PEPS min pounds 50 monthly, pounds 1,000 lump sum: 0800 414161

Gartmore European Selected Opportunities Trust PEP: min pounds 50 monthly, pounds 3,000 lump sum: 0800 289336

Guinness Flight Hambro Cautious Managed Portfolio PEP: 0171-522 2111

Invesco European Growth Fund PEP: min pounds 35 monthly, pounds 1,000 lump sum: 0800 010333

Perpetual: all PEPS min pounds 20 monthly, pounds 500 lump sum: 0500 417417

Save & Prosper Extra Income PEP: min pounds 35 monthly, pounds 1,000 lump sum: 0800 829100

Skandia MultiPEP: min pounds 25 per fund monthly, pounds 1,000 lump sum: 0800 243509.

TR European Growth PEP, from Henderson Investors: min pounds 100 monthly, pounds 2,000 lump sum: 0800 832832

Discount PEP brokers: Financial Discounts Direct: 0500 498 477 PEP Direct 0800 413186 PEP Shop 0115 982 5105

Independent Financial Advice Promotion (for three IFAs in your area) 0117 971 1177



IFA Brian Dennehy, of Dennehy, Weller & Co: "Fidelity allows investors to split their PEP allowance between different funds, so you could put up to pounds 1,500 into a riskier Japanese Values IT and the balance in a UK Special Value IT. For Europe the only fund to choose is the TR European Growth IT. This fund can be held under the Henderson PEP umbrella."

IFA Keith Sanham, of Miles Smith: "With uncertainty in the UK equity markets I like corporate bond PEPs. My preference is for Barclays Global Investors Gilt and Fixed Income fund, unless the investor wants a monthly income, in which case Commercial Union's Monthly Income Plus. "

IFA Andy Harris, of Maddison Monetary Management: "The Skandia MultiPEP gives a choice of 76 funds from good names such as Perpetual and Newton. We will give advice on what can go in it to give a mix of risk and performance."

IFA Ian Millward, of Chase de Vere: "Perpetual High Income for UK investors. In corporate bonds the CU Monthly Income Plus has a great track record. For Europe, Invesco has the Triple-A rated European Growth fund, Fidelity also has a good fund with a more aggressive management stance. To go mad, I suggest the Fidelity International Triple Performance PEP; you invest in UK Special Situations, Europe, and a choice between South- east Asia or American Special Situations."

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