PEP charges continue to tumble

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The Independent Online
MANAGERS of Personal Equity Plans are continuing to slash their charges.

Scottish Equitable is introducing a flat charge of pounds 45 plus VAT on its Pep and introducing penalties for those withdrawing early. Brown Shipley is cutting its initial charge completely on investments made from tomorrow until 4 September.

These moves follow price cuts by Fidelity and Gartmore, and other large groups are rethinking their PEP charges. .

Until now Scottish Equitable has offered two plans, one investing only in unit trusts and another in a mixture of unit trusts and shares. There has been a 5 per cent initial charge. The annual management charge was 1 per cent on the unit trusts within the plans and 1.25 per cent on the shares.

Scottish Equitable is launching a new PEP, called Premium, investing entirely in unit trusts - up to the permitted annual limit of pounds 6,000 - with a fixed annual fee of pounds 45 plus VAT and an annual charge of 0.875 per cent on top of each trust's annual management charge.

Six funds are available through the PEP - European, Blue Chip, High Income, UK & Global, Europe 200 and Ethical - and their annual charges range from 0.75 per cent to 1.25 per cent. The pounds 45 opening fee will be waived for investors opening a plan before 4 September.

Investors will pay the flat fee once a year if they want to open a new plan each year.

The PEP accepts lump sums and monthly contributions (minimum pounds 50). The redemption charges for early withdrawals are 4 per cent in the first and second years, 3.5 per cent in the third year, 2.5 per cent in the fourth and 1.5 per cent in the fifth, calculated on the value of the investment on withdrawal rather than the original amount put in. After that, investors can make three encashments a year without charge.