It's a good game, if you follow the rules

To safeguard their tax-free status, personal equity plans are subject to rules. These affect both you as an investor and where and how your money is invested.

PEPs are only available to people 18 and over who are, in the language of the Inland Revenue, "ordinarily resident in the UK for tax purposes". Since everyone has an individual PEP allowance, a married couple can each invest the maximum, but unused allowances cannot be transferred. You cannot pay into a PEP on behalf of someone else, so grandparents cannot contribute to a PEP for a child.

You will normally need to quote your National Insurance number on the application form. If you do not have a record of your NI number, you can find it on your P60 (the form showing tax and NI deductions, which your employer issues).

As a general rule you can invest pounds 6,000 in any tax year in a general PEP, one which invests in several different companies. You can also invest pounds 3,000 a year in a single-company PEP. But, and it is a big but, these limits apply only to "qualifying investments", defined as follows:

q Shares in companies that are registered in the UK or any other member state of the EU and which are quoted on a "recognised European exchange". This means your PEP can hold shares in Carrefour, the French supermarket chain, which is quoted on the Paris Bourse but not shares in Whittard of Chelsea, the tea and coffee merchant, because its shares are quoted on the Alternative Investment Market, which is not a recognised exchange.

q Single-company PEPs, which have a separate pounds 3,000 limit in addition to a general PEP, can invest only in the ordinary shares of a single EU company (excluding investment trusts).

q Bonds and loan stocks, which can be divided into three categories. Debentures are fixed interest bonds, secured on the company assets. Preference shares rank ahead of ordinary shares for repayment if a company is wound up, and again often carry a fixed dividend, while convertibles are loan stocks that can be converted into shares on a specific date some years in the future. Corporate bond PEPs must hold at least 51 per cent of their funds in such qualifying assets; the balance can be held in "non-qualifying" assets, which generally means cash, bank deposits and gilts.

Within the last few days, a fourth category of investment has been added to the list: your PEP can now invest in an Oeic (pronounced oik). This is an open-ended investment company, similar in many ways to a unit trust, but with a single price rather than a bid/offer spread.

If your PEP invests in non-qualifying assets, the maximum that you can put in during any one tax year is pounds 1,500.

The final rule is that your PEP must be operated by a licensed manager.

Travel
travel
News
Tim Vine has won the funniest joke award at the Edinburgh Festival 2014
peopleTim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
Sport
sportBesiktas 0 Arsenal 0: Champions League qualifying first-leg match ends in stalemate in Istanbul
News
Jamie and Emily Pharro discovering their friend's prank
video
PROMOTED VIDEO
News
ebooksAn evocation of the conflict through the eyes of those who lived through it
Sport
Manchester United are believed to have made a £15m bid for Marcos Rojo
sportWinger Nani returns to Lisbon for a season-long loan as part of deal
News
news
News
i100
Arts and Entertainment
O'Toole as Cornelius Gallus in ‘Katherine of Alexandria’
filmSadly though, the Lawrence of Arabia star is not around to lend his own critique
Life and Style
fashion
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

Business Anaylst

£60000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Business Anal...

Senior Project Manager

£60000 - £90000 per annum + Bonus: Harrington Starr: Global leading Energy Tra...

Associate CXL Consultant

£40000 - £60000 per annum + BONUS + BENEFITS: Harrington Starr: CXL, Triple Po...

Oil & Energy Business Anaylst

£45000 - £75000 per annum + BONUS + BENEFITS: Harrington Starr: Harrington Sta...

Day In a Page

Ferguson: In the heartlands of America, a descent into madness

A descent into madness in America's heartlands

David Usborne arrived in Ferguson, Missouri to be greeted by a scene more redolent of Gaza and Afghanistan
BBC’s filming of raid at Sir Cliff’s home ‘may be result of corruption’

BBC faces corruption allegation over its Sir Cliff police raid coverage

Reporter’s relationship with police under scrutiny as DG is summoned by MPs to explain extensive live broadcast of swoop on singer’s home
Lauded therapist Harley Mille still in limbo as battle to stay in Britain drags on

Lauded therapist still in limbo as battle to stay in Britain drags on

Australian Harley Miller is as frustrated by court delays as she is with the idiosyncrasies of immigration law
Lewis Fry Richardson's weather forecasts changed the world. But could his predictions of war do the same?

Lewis Fry Richardson's weather forecasts changed the world...

But could his predictions of war do the same?
Kate Bush asks fans not to take photos at her London gigs: 'I want to have contact with the audience, not iPhones'

'I want to have contact with the audience, not iPhones'

Kate Bush asks fans not to take photos at her London gigs
Under-35s have rated gardening in their top five favourite leisure activities, but why?

Young at hort

Under-35s have rated gardening in their top five favourite leisure activities. But why are so many people are swapping sweaty clubs for leafy shrubs?
Tim Vine, winner of the Funniest Joke of the Fringe award: 'making a quip as funny as possible is an art'

Beyond a joke

Tim Vine, winner of the Funniest Joke of the Fringe award, has nigh-on 200 in his act. So how are they conceived?
The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

The late Peter O'Toole shines in 'Katherine of Alexandria' despite illness

Sadly though, the Lawrence of Arabia star is not around to lend his own critique
Wicken Fen in Cambridgeshire: The joy of camping in a wetland nature reserve and sleeping under the stars

A wild night out

Wicken Fen in Cambridgeshire offers a rare chance to camp in a wetland nature reserve
Comic Sans for Cancer exhibition: It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans

Comic Sans for Cancer exhibition

It’s the font that’s openly ridiculed for its jaunty style, but figures of fun have their fans
Besiktas vs Arsenal: Five things we learnt from the Champions League first-leg tie

Besiktas vs Arsenal

Five things we learnt from the Champions League first-leg tie
Rory McIlroy a smash hit on the US talk show circuit

Rory McIlroy a smash hit on the US talk show circuit

As the Northern Irishman prepares for the Barclays, he finds time to appear on TV in the States, where he’s now such a global superstar that he needs no introduction
Boy racer Max Verstappen stays relaxed over step up to Formula One

Boy racer Max Verstappen stays relaxed over step up to F1

The 16-year-old will become the sport’s youngest-ever driver when he makes his debut for Toro Rosso next season
Fear brings the enemies of Isis together at last

Fear brings the enemies of Isis together at last

But belated attempts to unite will be to no avail if the Sunni caliphate remains strong in Syria, says Patrick Cockburn
Charlie Gilmour: 'I wondered if I would end up killing myself in jail'

Charlie Gilmour: 'I wondered if I'd end up killing myself in jail'

Following last week's report on prison suicides, the former inmate asks how much progress we have made in the 50 years since the abolition of capital punishment