But for the rest of us the choice is bewildering. There are dozens of fund management groups and investment houses offering PEP packages.
Ask yourself why you want a PEP. It's a highly tax-efficient investment vehicle, but only for taxpayers, especially higher-rate taxpayers. And even if you are a basic-rate taxpayer, it makes sense to keep your shares in a PEP if you aren't charged anything extra for it. All the returns are tax free and you do not have to declare a PEP on a tax return. (See the introduction to PEPs on p16 for more basic information).
Do not even consider a PEP, however, unless you think you can leave the money untouched for at least five years - and preferably much longer. You will get the best returns if you leave the money invested for many years.
Many people see PEPs as part of their retirement strategy, and even if you are still in your 20s or 30s, it is well worth keeping these long- term goals in mind.
Before buying a PEP, you need to work out what sort of investment you want. In very basic terms, PEPs offer growth or income, or a combination of the two.
If you are unsure how to go about finding a good PEP, you need to spend some time doing background reading and research, or to pay an independent financial adviser (IFA) to find you a PEP. If you invest pounds 6,000 the adviser will get about pounds 180. You can save that cash by doing your own legwork, so you need to decide how much time you want to devote to your financial planning.
To find a suitable IFA, ask your friends and relatives for a recommendation. If they don't have one, IFA Promotions (on 0117-971 1177) will supply of list of those in your locality. These lists are not recommendations - IFAs vary hugely in terms of their expertise.
If you decide to go it alone, you can get masses of information without much effort. You should be able to track down everything you need to pick a good PEP from:
Newspapers and magazines. This is peak season for PEPs, so all the papers are carrying special reports (like this) and features. There are also several specialist investment and finance magazines in newsagents, including Investors Chronicle (pounds 2.95 weekly) and Moneywise (pounds 2.95 monthly).
The internet. There is a huge amount of useful stuff on the internet, including general personal finance sites such as Moneyworld (www.moneyworld.co.uk) and Interactive Investor (www.iii.co.uk). These sites have general articles and links to PEP managers' own sites.
The sites vary hugely in quality but two worth looking at are Save & Prosper (www.prosper.co.uk) and Fidelity (www.fidelity.co.uk). Obviously, they plug their own funds but both firms have posted information about PEPs, ISAs and general issues around investing.
Discount PEP brokers. When you come to buy your PEP, you should deal through a discount PEP broker rather than going direct to the fund manager. (The only exceptions to this are some investment trust PEPs and some tracker funds, which have very low charges.) Most PEP brokers do not give advice but they do have extremely comprehensive information packs, complete with flow charts and recommendations.
If you already have a PEP in mind, the discounter should be able to sell it. Most PEPs are sold with at least 3 per cent knocked off the normal 5 or 5.5 per cent initial charge, so you save at least pounds 180 on pounds 6,000.
The most popular PEPs from the big-name houses such as Jupiter, Mercury, Perpetual and M&G are often sold in such volume that the broker can get an even better discount. Allenbridge (which also has an excellent website at www.allenbridge.co.uk) is offering Jupiter at a full 5 per cent discount and many other firms are offering 4 per cent off. Most of these services are free although PEP Direct charges a pounds 25 fee.
The fund managers. When you have drawn up a shortlist of PEPs, get hold of the managers' information packs and check the small print. If you still like what you see go ahead and buy the PEP from a discount broker.
Investment trust information. You will see unit trust (and increasingly Oeic) PEP funds being plugged all over the place but investment trusts are well worth investigating before you buy a PEP. Shares in many investment trust funds are being sold at well under their true value, so you could end up with a bargain.
It's worth speaking to a PEP broker before you buy an investment trust, but since investment trusts are generally very cheap to buy, you may as well speak direct to the manager. It can be hard to find information about investment trusts so get hold of the useful fact sheets from the Association of Investment Trust Companies. (Call 0171-431 5222).
Having got hold of a mass of information, sift through it to decide on the right PEP.
"Don't just go for those with the lowest charges," says Graham Bates, a Yorkshire-based IFA. "Low costs do not always equal good value. It's performance that counts. And when looking at performance, look at consistency. Those at the top of the table at any one time could have got there by taking big risks. Go for a fund that performs well in its sector year in and year out."
If you are new to PEP investing, you may want to concentrate on the larger groups such as Fidelity, Perpetual, M&G, Schroder, and HSBC. They will continue as active PEP managers long after PEPs have been replaced by individual savings accounts (see article opposite), while some of the small groups may decide to opt out of offering ISAs.
The downside to "following the herd" is that funds can become too large and unwieldy. Some of the bigger houses, including Perpetual and Jupiter, have started to experience performance problems.
Take a long view and try not to be swayed by advertising.
Contacts: Allenbridge, 0800 339999; Chelsea Financial Services, 0171- 351 6022; The Discount Shop, 0171-681 1654; Financial Discounts Direct, 0500 498477; PEP Direct, 0800 413186; The PEP Shop, 0115 982 5105.Reuse content