Guaranteed to beguile some investors

And yes, another of those wretched "guaranteed" PEPs, this time from Legal & General. Legal & General is one of a handful of traditional insurance companies which have decided to take on the new providers of financial services led by Richard Branson and Marks & Spencer with products aimed at the common man. It offers cheap and cheerful pensions products and tracker PEPs.

Its latest product - the Legal & General Election PEP - is aimed at nervous investors who want to protect themselves against the ups and downs of the stock market in an election year. But in fact, it is much the same as all the other guaranteed PEPs, and actually, when you look beyond the marketing hype, not all that it seems.

Investors are invited to invest in a company based in Dublin, which in turn puts 70 per cent of the proceeds on deposit with banks and building societies and uses 30 per cent to buy options on the FTSE index. That's a long way from the original concept of a PEP, but for the time being the Revenue doesn't seem to be bothered. In return investors are offered their money back if the stock market falls over the next five years, and 40 per cent on top of any growth in the FTSE 100 index. Sounds great, doesn't it?

But actually, it's just smoke and mirrors. You don't get any income out of this product, which means that you would almost certainly do just as well, if not better, in a conventional L&G tracker fund. With rolled up dividend income, the tracker will in most circumstances outperform the guaranteed PEP, which is why L&G is able to offer such an apparently attractive product. The more conventional product also carries the advantage of no initial or exit charges, a management fee of just 0.5 per cent, and the automatic right to withdraw or transfer funds at any time.

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