Budget spices up the PEP sales race

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The Independent Online
PERPETUAL and Jupiter are neck-and-neck in the annual race to be the top seller of personal equity plans (PEPs) - baskets of stocks and bonds qualifying for pounds 9,000 a year in tax breaks - say fund management executives and analysts.

The race, which ends on Friday, the last working day of the tax year, may be decided by as little as pounds 5m, even though total PEP sales for the tax year will be about pounds 5bn, believes Lawrence Gosling, editor of Investment Week. "Last year Jupiter and Perpetual each did about pounds 400m in the January- April PEP season. This year they could each do pounds 600m," Mr Gosling said.

Roger Cornick, Perpetual's marketing director, said: "We could do rather more than pounds 600m. But whether we end up number one is anyone's guess."

Stephen Glynn, Jupiter's marketing director, reported: "January-February sales were down 25 per cent compared to the previous year because of uncertainties about the Budget. But the good news in the Budget means March will be much bigger."

The loser in this year's PEP sweepstakes is likely to be Schroder Asset Managment. "The high-street banks pitched PEPs in a big way this year," said Mr Gosling. "Schroders has lost ground because of that and because of internal problems."

Clive Boothman, managing director of Schroder Unit Trusts, conceded: "Our PEP sales are going to be down 20 per cent from last year. The winners [of the PEP sales race] tend to be concentrated. We've been lucky to be in the top group over the past couple of years. This year we slipped. We haven't captured new customers coming into the market."

In his Budget, Gordon Brown announced that the tax breaks for PEP buyers would last through 1999, after which PEPs will be abolished in favour of Individual Savings Accounts. Industry executives say the news coverage of this change, and anxiety over the future of state pensions, are giving a big boost to PEPs and other savings and investment products sold to individuals.

"PEPs and PEP-like products generally get written up in the personal finance pages of the news," said Andrew Smithers, a principal at fund management advisers Smithers & Co. "But from a City viewpoint they are what everyone is talking about. Retail investment products is where the growth in the City is."

Mr Smithers suggests that the traditional niche providers of PEP-style products will face growing competition from foreign giants like the US mutual fund group Fidelity (pounds 275bn in funds under management, compared with pounds 5.8bn for Perpetual), as well as City giants like Mercury Asset Management. "We launched the very first PEP on 1 January 1987," said Fidelity UK spokesman Paul Kafka. "It has taken us a long time to build our business in Britain. Now we feel we've finally hit our stride."

PEPs remain a tiny slice of the City's total funds under management. The total was pounds 49.8bn in April 1997, according to Inland Revenue, less than 5 per cent of the total pounds 1,600bn in UK funds under management in Britain.

But Mr Boothman said: "The numbers underestimate their importance. PEPs have served as a beachhead in raising public consciousness about investing in shares."