This original style of PEP is now known as a self-select plan, and can still be used in the same way but with far more flexibility than its originator, Nigel Lawson, could have foreseen 10 years ago.
The concept is simple: the PEP manager - in this context, almost certainly a stockbroker - buys shares on your behalf which are held in the PEP, and the earnings are entirely free of both income tax and capital gains tax.
You can also use a self-select PEP to shelter existing investments - shares or unit trusts - by having your broker sell them and then buy them back into the plan.
But before you head for the attic to blow the dust off those early privatisation issues and long-standing unit trust holdings, think for a moment. Will the operation be worth while, or will the costs outweigh the tax saving?
That depends on several factors: how many holdings are involved; their likely yield over the next few years; and whether the sale takes you over the threshold for capital gains tax.
Nigel Reynolds of ShareLink says that with some low-yielding shares, the payback would not come until the end of the century - or even beyond. "It's essential to look carefully at the specifics in each case."
Richard Fullman at Henderson Crosthwaite says that with small share stakes, a liability for CGT is unlikely - but it is vital to check: "You need to know what other transactions there have been during the current year to establish if there might be a tax problem."
An alternative way of "tidying up" small share stakes or unit trust holdings is to use a share exchange scheme, in which a PEP manager sells your shares and invests the proceeds in a managed fund.
Increasingly, in these discount days, many managers will absorb some or all of the costs involved. Hill Samuel Asset Management, one of the UK's top 10 fund managers, this week becomes the latest to join their ranks when it launches a free share exchange scheme for all nine of its unit trust PEPs. The deal will be available only through independent financial advisers, but will take any number of share stakes provided they are worth at least pounds 1,000.
For most investors, the best way to operate a self-select PEP is to start from scratch. The usual PEP rules apply, but you can "mix and match" to meet your investment objectives.
Let's say you are looking for high growth and are prepared to take some risks: you could overweigh your PEP portfolio in favour of emerging markets by investing in unit trusts or investment trusts that hold up to half their assets in this sector.
You could also add UK equities that benefit from emerging market growth - for example, companies with profitable operations in the Pacific Rim.
An alternative strategy might be to focus in similar fashion on smaller companies - perhaps with a mixture of managed funds specialising in this sector, combined with a direct equity stake.
Self-select PEPs can be operated in a number of different ways, reflecting different individual involvement in investment decisions.
If you have a large portfolio, with a PEP every year, your account may be operated on a discretionary basis - where the broker knows your objectives and acts accordingly, keeping you informed after transactions take place. More common for active investors is the advisory service in which you and your broker discuss investment proposals and you take the final decisions.
The third type of account is execution-only, in which the broker may provide information, but offers no advice. The largest manager of execution- only PEPs is ShareLink, which pioneered the concept; its customers now have almost pounds 400m invested in such plans. Dealing commissions are 1.5 per cent, with a minimum of pounds 20 and a maximum of pounds 37.50. There is a new issues charge of pounds 10, and management fees start at pounds 5 a quarter.
One final point: if you are interested in new issues bear in mind that, under tax rules, only public offerings (or those through intermediaries) qualify. Shares issued through a placing are not immediately PEPable, but they can be bought in the market.