Superdogs are defined by Virgin as those funds under-performing average returns for their respective sectors over three consecutive three-year periods. In other words, says Virgin, these funds have managed to let Pep investors down - whether they invested at the beginning, in the middle or only recently.
As you might expect, Virgin recommends its own tracker "Growth Pep" as an alternative. But Gordon Maw, Virgin Direct's marketing manager, argues: "This is not just a marketing ploy. The real issue is that of active-versus-passive fund management. Our Pep is a tracker fund, passively managed to follow the FT-SE All Share Index - and we think it gives better value to most investors than an actively managed fund.
"Many of the claims made on behalf of active fund managers are just hokum. Investors pay high charges to buy into these funds, but few if any of the fund managers can do consistently better than a tracker fund following the All Share Index."
Not everyone agrees, however. Last year Virgin included two funds from Fidelity "Growth & Income" and "Income Plus" in their Superdog League - not long after Tom McCarron took over as head fund manager for both funds.
"I can only say I'm sorry if anyone switched on Virgin's recommendation," says Mr McCarron. "These funds had lagged, but since last year they've improved a very great deal. In fact, `Growth & Income' is now third in its sector, while `Income Plus' comes seventh."
Fidelity says both would have beaten Virgin's Tracker Pep over the last 12 months.
"The problem with tracker funds is that investors going into them over the last few years think they are risk-free," observes Mr McCarron, "but that simply isn't true. Trackers have no index risk - they move with a particular index of share values like that All-Share - but they do carry market risk.
"If a particular market, measured by an index on which a tracker is based, goes bearish or turbulent - that's to say, it stops just rising in value, but falls or can't decide - then these tracker funds will mimic this behaviour.
"At that point a lot of investors are going to realise just how risky a tracker fund can be."
Virgin is not the only Pep provider to use a past performance league table as a means of persuading Pep owners to switch their holdings. Best Investment has published an annual "Spot The Dog Guide" for several years.
Jason Hollands, a Best spokesman, sees trouble ahead for trackers and thinks that we should "aim to spot good teams of active fund managers who will do better than the market when things turn sour".
The real prize behind much of this aggressive marketing is the more than pounds 22bn that investors have locked up in existing Peps.
Remember, even when Peps are abolished on 5 April next year, and replaced by the Individual Savings Account (ISA), existing Peps will stay in force.
Pep rules allow an existing plan to be switched within the qualifying funds of a particular manager, or to be switched between different Pep providers without loss of the tax relief. The management charges levied on these funds alone make "switching" a lucrative battleground.
Anthony Yadgarof, who runs the Pep broker Allenbridge, argues: "All these scare tactics are aimed at getting you to transfer, either to a tracker Pep or to an alternative managed fund.
"Anyone tempted should be very careful of what all of this can cost, and whether they are receiving adequate financial advice in the process. Virgin's main interest is that you switch out of a Pep held in any one of several sectors - say UK Income & Growth, or UK Smaller Companies - into a tracker growth fund. In investment terms these are chalk and cheese."
Virgin is offering those who switch into their Growth Pep an inducement - "by paying the transfer penalty on behalf of the customer" - but in reality this is not worth much if anything to many tempted by their offer.
The real cost of making a Pep transfer lies in any "bid to offer spread" imposed on the Pep fund. This represents the difference between the price at which you buy units from a fund manager and the price at which they are redeemed by the manager if you encash your holding.
Most retail unit trust Peps carry a bid to offer spread of between 3 and 5 per cent. So if you are transferring a plan "worth", say, pounds 7,000, with a bid to offer spread of five per cent, the real cost amounts to pounds 350, with a net transfer value of pounds 6,650.Reuse content