Bargain hunters look no further

I'VE YET to make it to the January sales. But I don't expect to find as good value as is now creeping into the tax-free investment world of personal equity plans.

PEP buyers have never had it so cheap. Last week saw Legal & General in effect halve the price of its UK Index Tracking PEP. The only charge investors face now is 0.5 per cent of the value of their PEP a year. Compared with all too many traditional PEPs that take up to three times as much annually - plus a one-off chunk sometimes amounting to more than 5 per cent - that's good.

Better still, savers prepared to buy the same L&G PEP for the next tax year will get a refund equal to one annual charge, worth up to another pounds 30. In effect, that means free investment for one PEP for a year.

But it doesn't have to stop there. L&G is paying financial advisers to sell this PEP. So by buying through a discount broker, investors can get a rebate of some of this commission and so increase their period of charge-free investment. London-based Chelsea Financial Services will grant a rebate of 0.5 per cent of whatever you invest. Every 0.5 per cent means another year of charge-free investment.

So what's the catch? Will it perform? There are of course no guarantees. But there is no reason to doubt the PEP will do broadly what its Index Tracker name suggests - match the performance of the stock market. The tracker investment process is straightforward and L&G has plenty of experience in running funds of this kind.

That said, trackers - bizarre though it may seem - do actually tend to underperform slightly as a result of their charges. But L&G's minimal charges should make it potentially the best among trackers. And how will that stack up? Historically, stock market performance has been more than enough to beat the vast majority of more ambitious PEP rivals, which while trying to beat the market have generally fallen short. Worse still, finding that market-beater is all too much of a lottery. Simply picking the cheapest tracker is a much safer bet.

One caveat is that it's difficult to get excited about the UK stock market's short-term outlook. A setback, correction - crash even - seems more likely than a repeat of last year's returns of 20 per cent.

Fortunately, however, savers determined to use this year's PEP allowance have until the end of the tax year in April. With the market at this all- time high and the prospect of further attractive PEP deals, there's no reason to hurry.

HOWEVER, my real quandary is that what little money I can afford to invest I earmarked for Asia in my new year's investment resolutions, which I outlined in this column last week. But investment companies with Asian funds are not exactly champing at the bit to cut costs (in addition, Asian funds are generally not available in tax-free PEP form). A free directory from the unit trust trade body Autif (called Unit Trusts - The Directory, available on 0181-207 1361) lists charges on most of these funds of 1.5 per cent a year, with up to 6 per cent upfront. Such fees seem to reflect the ability of these markets to deliver high returns rather than fair rewards for the managers.

Time for cost competition to head east...

Start your day with The Independent, sign up for daily news emails
Life and Style
love + sex
Life and Style
Tikka Masala has been overtaken by Jalfrezi as the nation's most popular curry
food + drink
News
people
Voices
A propaganda video shows Isis forces near Tikrit
voicesAdam Walker: The Koran has violent passages, but it also has others that explicitly tells us how to interpret them
ebooks
ebooksA special investigation by Andy McSmith
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.

iJobs Job Widget
iJobs Money & Business

Reach Volunteering: External Finance Trustee Needed!

Voluntary post, reasonable expenses reimbursed: Reach Volunteering: Would you ...

Christine McCleave: FP&A Analyst

£36,000 - £40,000: Christine McCleave: Are you looking for a new opportunity a...

Recruitment Genius: Sales Executive - OTE £40,000

£15000 - £18000 per annum: Recruitment Genius: This is a great opportunity for...

Austen Lloyd: Law Costs HOD - Southampton

£50000 - £60000 per annum + Excellent Salary: Austen Lloyd: An outstanding new...

Day In a Page

Syrian conflict is the world's first 'climate change war', say scientists, but it won't be the last one

Climate change key in Syrian conflict

And it will trigger more war in future
How I outwitted the Gestapo

How I outwitted the Gestapo

My life as a Jew in wartime Berlin
The nation's favourite animal revealed

The nation's favourite animal revealed

Women like cuddly creatures whilst men like creepy-crawlies
Is this the way to get young people to vote?

Getting young people to vote

From #VOTESELFISH to Bite the Ballot
Poldark star Heida Reed: 'I don't think a single bodice gets ripped'

Poldark star Heida Reed

'I don't think a single bodice gets ripped'
The difference between America and Israel? There isn’t one

The difference between America and Israel? There isn’t one

Netanyahu knows he can get away with anything in America, says Robert Fisk
Families clubbing together to build their own affordable accommodation

Do It Yourself approach to securing a new house

Community land trusts marking a new trend for taking the initiative away from developers
Head of WWF UK: We didn’t send Cameron to the Arctic to see green ideas freeze

David Nussbaum: We didn’t send Cameron to the Arctic to see green ideas freeze

The head of WWF UK remains sanguine despite the Government’s failure to live up to its pledges on the environment
Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Author Kazuo Ishiguro on being inspired by shoot-outs and samurai

Set in a mythologised 5th-century Britain, ‘The Buried Giant’ is a strange beast
With money, corruption and drugs, this monk fears Buddhism in Thailand is a ‘poisoned fruit’

Money, corruption and drugs

The monk who fears Buddhism in Thailand is a ‘poisoned fruit’
America's first slavery museum established at Django Unchained plantation - 150 years after slavery outlawed

150 years after it was outlawed...

... America's first slavery museum is established in Louisiana
Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

Kelly Clarkson: How I snubbed Simon Cowell and become a Grammy-winning superstar

The first 'American Idol' winner on how she manages to remain her own woman – Jane Austen fascination and all
Tony Oursler on exploring our uneasy relationship with technology with his new show

You won't believe your eyes

Tony Oursler's new show explores our uneasy relationship with technology. He's one of a growing number of artists with that preoccupation
Ian Herbert: Peter Moores must go. He should never have been brought back to fail again

Moores must go. He should never have been brought back to fail again

The England coach leaves players to find solutions - which makes you wonder where he adds value, says Ian Herbert
War with Isis: Fears that the looming battle for Mosul will unleash 'a million refugees'

The battle for Mosul will unleash 'a million refugees'

Aid agencies prepare for vast exodus following planned Iraqi offensive against the Isis-held city, reports Patrick Cockburn