Equally though, that doesn't mean you have to be an expert. Gavin Oldham of The Share Centre, one of the many brokers to offer self-select plans, says: "We feel they are suitable for most investors." He reckons that, unless you're a total beginner, a self-select PEP could be useful as long as you are prepared to take at least some advice on your investments.
Not least, this is because self-select PEPs offer more flexibility than managed funds. If you invest in a PEP from one of the big unit or investment trust providers, it can be difficult to switch out of the fund you choose, especially if you want to move to another PEP manager. But a self-select PEP lets you change the investments you hold whenever you want.
Self-select plans are also often cheaper than managed PEPs. Initial charges are rare, though you may have to pay a set-up fee of, perhaps, pounds 50. Annual charges are levied in different ways but are not likely to add up to more than 1 per cent of the value of your portfolio, particularly if you hold shares directly rather than through unit and investment trusts.
But even if you use your self-select PEP to hold funds, it often works out cheaper than investing via a managed PEP. Do remember there are dealing charges. If you deal often, these fees mount up. Expect to pay between 0.75 and 1.5 per cent of the value of your deal on sales and purchases worth up to pounds 10,000, more if you want advice.
Ian Millward of independent financial adviser Chase de Vere disagrees with Gavin Oldham. "Self-select plans are really only for sophisticated investors," he maintains.
Most self-select PEP providers are stockbrokers who will deal on your behalf on an execution-only basis, without advice, or with investment advice. Some only offer execution-only services. The Association of Private Client Investment Managers and Stockbrokers will supply you with details of all brokers offering self-select PEPs.
Some brokers also offer corporate PEPs, which are similar to self-select PEPs except that corporate PEPs are set up by companies to encourage people to buy their shares. As a result, with most corporate PEPs, you are usually restricted to holding shares in just one company. The plan can be set up as a general PEP, in which case the maximum investment allowed is pounds 6,000, or as a single company PEP, where you can invest just pounds 3,000 in any one tax year.
Corporate PEPs are usually good value, and can be a good investment if you believe in the prospects for your company. On the other hand, putting a whole PEP allowance into one stock leaves you very exposed.
David Prosser is features editor of 'Investors Chronicle'.
Association of Private Client Investment Managers and Stockbrokers: 0171-247 7080.