Competition is so fierce that in some cases investors can actually receive a cash payment for graciously consenting to part with their money through certain PEP discount shops.
Leading the charge are the "execution-only" discount brokers, who hope to attract a growing slice of the many billions expected to pour into PEPs between now and 5 April, when the tax year ends.
Indeed, many advisers predict that the surge of money into tax-free PEPs will continue beyond the traditional April deadline, as investors seek to shelter their funds from a supposedly hostile incoming Labour administration.
Over the past 10 years, execution-only brokers have more than tripled their share of the PEP market to about 10 per cent, according to some estimates.
Their attraction is easily explained. Traditionally, investing in a PEP or unit trust might cost an upfront fee of 5 or 6 per cent, of which the provider keeps up to 3 per cent for administration charges while the adviser takes the other half. In recent years providers such as M&G, Virgin, Gartmore and Legal & General have moved to cut the upfront fee or even abolish it for some PEPs and unit trusts.
Financial advisers have sometimes followed suit, by handing much of their commission back to the client.
Garrison Investment Analysis, of Sheffield and York, operates on this principle. Brian Jones, a director, says: "We are not strictly an execution- only service. We charge 1 per cent and rebate the rest back to the client.
"We are happy to listen to a client and prepare a report, setting out where we believe he should be investing his money. This can't be done for free."
Discount brokers go one stage further. Haydn Green, founder of the PEP Shop in Nottingham, says: "There are two natural types of investor. There is the client who may have specific requirements, for whom a PEP investment is one part of a package of financial advice.
"The second type is someone who does not need that sort of advice. He sees himself as more sophisticated and with an understanding of the market. In that context investors like him will also be prepared to shop around for the best deal. Our aim has been to cater for that type of investor."
The PEP Shop attracted pounds 60m of investors' savings last year and hopes to improve significantly on that in 1997. It plans to do so by offering to match the best deal available from any broker and throw in a further pounds 25.
Meanwhile, Chelsea Financial Services has launched The PEP Superstore, passing all commission back to the client. Perry Kitchen, the finance director, says: "The logic of discount services is that once you have started down this path, you have to continue to the bitter end."
The PEP Superstore promises to give investors a cashback of 0.75 per cent, or pounds 45, of their pounds 6,000 investment in a Legal & General Index Tracking PEP.
Discount brokers traditionally earn their money on the "renewal commission". This is a small slice, usually 0.5 to 0.75 per cent of the original investment, paid by the fund manager to the broker for every year you keep your investment with that firm.
Buying a PEP through an execution-only broker is simple. One phone call will lead to you being sent an application form, which you complete and return with a cheque made out in the name of the PEP provider.
Depending on the broker, you either make out a further cheque for his part in the transaction, or he sends you one for deigning to give him your custom.
Some have taken the concept one step further. PEP Direct, a freephone service in Wolverhampton, usually charges just pounds 25 for each investment. This year, it has launched a half-price service of pounds 12.50 for spouses and other family members.
It promises to match the best deal and pay a further pounds 5, while potential clients can also obtain hefty discounts on a far wider range of products, including pensions, insurance and with-profits bonds for those buying over the phone.
Perhaps not surprisingly, some independent financial advisers (IFAs) have not warmed to the execution-only service.
Roddy Kohn, principal of Kohn Cougar, a Bristol IFA firm, argues: "There may be a very small minority which knows exactly how it wants to invest its money. But the majority of people need a different type of service.
"First, PEP investment is only one part of a person's overall financial planning. It could be that after a review of someone's finances, putting money into a pension is far more sensible and tax-efficient. Or paying off one's debts or part of the mortgage.
"Second, even if a PEP is what's needed, there are hundreds of different options to consider depending on an individual's risk profile and other needs. An independent financial adviser can take all these factors into consideration.
"Of course it does cost money," he adds. "But people should be asking themselves whether it makes sense to put thousands of pounds at risk just to save a couple of hundred. For most of us, it does not."
q Contacts: The PEP Superstore, 0171 351 6022; PEP Direct, 0800 413186; PEP Shop, 0115 9825105; Garrison Investment Analysis, 01482 861455; Kohn Cougar, 0117 946 6384. For a list of IFAs near you, call 0117 971 1177.Reuse content