One reason for this is the abolition of new PEPs from April, and their replacement by the new Individual Savings Account (ISA). ISAs will allow a far wider range of "permitted" investments than are available through a PEP. But annual subscription limits will be lower at pounds 7,000 for 1999/2000, and pounds 5,000 a year thereafter. You still invest up to pounds 6,000 into a "general" PEP, and pounds 3,000 into a "single company" plan.
Christine Ross, of independent financial advisers Willis National, says: "Take the example of a married couple. Both could invest as much as pounds 18,000 into PEPs before the end of this tax year, but only pounds 14,000 into ISAs during the next one."
However: "Investing for no better reason than a PEP's tax-free status is not wise. The important point is that any decision to invest should fit in with a broader financial plan."
If you decide to use ISAs as a means of long-term saving, then you may want to transfer any PEPs taken in the current year. Front-loading your ISA account in this way could give better long-term returns than drip feeding your cash into the new account over a number of years.
There is nothing to prevent you transferring PEPs and switching the type of investment you hold as you move from one to the other. For instance, you could use a PEP unit trust to buy gilts in an ISA.
Changes in the tax treatment of dividends paid in PEPs and ISAs will mean a reduction of just over 10 per cent in the amount of income you receive from equity funds. But Chris Brealey, tax adviser at the Association of Unit and Investment Trusts (AUTIF) says: "Over the next five years, equity PEPs will remain tax efficient for anyone already paying income tax, thereafter only if you switch to bond funds, or have an outstanding capital gains tax liability."
Ms Ross agrees: "There's still plenty of room for tax planning with PEPs. After all, even at the reduced rate of dividend tax credits, a high-rate taxpayer is still saving almost three quarters of the income tax they'd pay on un-PEPped dividends."
Turbulent share prices mean investors face some difficult decisions about when to invest. Jason Hollands, at Best Investments, says "pound cost averaging" - spreading your investment over time - is probably the most prudent course.
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