The birth of the ISA: Is your portfolio in the right team?

You may not be able to add to your PEPs, but now the decision is whether to transfer or consolidate. By Rachel Fixsen

TOO LATE - your last chance to put money into a Personal Equity Plan has gone. But with more than pounds 80bn already tucked away in PEPs, the battle between financial services providers to get their hands on your investment has only just begun.

It has always been possible to transfer your PEP from one investment fund to another and even from one provider to another, although there are certain restrictions.

For instance, moving money between funds run by a single PEP manager is quite easy, but if you are transferring to another manager, you have to move one whole tax year's general PEP at a time, even though this might be split between different investments.

And some providers "bundle" plans taken out in different tax years, making them impossible to separate. In these cases, you have to move all or nothing.

Many investors have shifted PEPs from one manager to another in the past, but now that PEP funds cannot be added to, transfer activity could hot up.

"Quite a lot of PEP investors have five or six years' of PEPs under their belt, and they are now starting to review them - in the early years, they weren't too concerned," says Philip Warland, director general of the Association of Unit Trusts and Investment Funds.

PEP providers have been pulling out all the stops in the last few months to capture investment capital in the last PEP year. In that competition, the most that was at stake was pounds 6,000 per person, but in the battle for PEP transfers the sums are much larger, running into tens of thousands of pounds for each individual.

"There will be continued rumblings in the market," says Mr Warland.

Although PEPs are now closed to new money, they have been replaced by a very similar investment vehicle - the Individual Savings Account. Overall annual investment limits are lower than for PEPs, but ISAs do allow a much broader spread of investment.

However, financial services providers are still unsure how popular ISAs will be, and until they really take off the fight over existing PEP funds will go on.

There are many reasons why a PEP holder might want to transfer. You could just be dissatisfied with your PEP provider. Or you might have been investing for capital growth at the beginning, but now need an income stream, particularly if you are retiring. There may be no satisfactory income fund available from you current PEP manager.

If you have a substantial portfolio of PEPs where a large proportion is with one fund manager, you might want to spread your risk by shifting some funds to a different manager.

Or if your PEPs are scattered between different providers you might try to cut the paperwork by consolidating them under one provider - though not into the same fund.

Janice Thomson, of discount broker Chelsea Financial Services, warns against transferring PEP funds unless there is a very good reason for it. Valid reasons might be because your requirements have changed, because you want to change the geographical or sectoral balance of your portfolio or because your fund is consistently out performed by other similar funds, she says.

Stay put if you can, because transferring can be very expensive. If you are just switching to chase better investment performance, the move can prove counterproductive. PEP transfers are usually treated as new business and the initial fee can be as much as 5 per cent. There may also be a transfer charge and commission.

Transfers into Capel-Cure Myers' unit trust PEP, for example, is very expensive. There is a 5 per cent initial charge and this added to the transfer charge and commission cuts 6.9 per cent off the value of the investment, according to Money Management, a specialist publication.

However, some PEP managers encourage transfers by waiving the initial charge. Direct PEP providers such as Direct Line, Equitable and Virgin Direct make no initial charge or commission on money transferred into their PEPs, neither does Legal & General.

If you want someone to make the decisions for you on your PEP investments, you could opt for a fund of funds PEP. Henderson Investors offers its Transfer PEP where you can choose between an income or growth portfolio or a mixture of the two. The PEP is linked to Henderson's fund of funds unit trusts.

"Clients will continue to receive a spread of investment styles and investment houses," says Sarah Speake of Henderson Investors. Each fund of funds typically invests in between 12 and 20 different funds. Though funds of funds always involve a double layer of charges, Ms Speake says Henderson is able to negotiate discounts.

There is no initial charge for PEP transfers.

If you do want to make a change, you should first consider whether your existing PEP manager has another fund which would be better. This is the quickest and cheapest way to change your portfolio, says Janice Thomson. "This way you are not out of the market for a long period when you might lose out to market fluctuations," she says.

Transfers often take an unaccountably long time, she warns. If you just want to simplify your PEPs but keep the actual investments the same, an umbrella PEP provider such as Skandia or Eurolife can make sense. Skandia's MultiPEP offers access to 98 funds run by different investment managers including Fidelity, Perpetual and M&G.

"You have to consider whether it's a service worth paying for," says Janice Thomson. It can cost an extra 0.5 per cent a year. These services can help those investing for income who find it hard to keep track of the various cheques coming in.

But they become expensive if you or you adviser show no more interest in researching new investment opportunities and actively switching funds in your portfolio during each tax year.

News
The surrealist comedian at the Q Awards in 2010
people
Life and Style
Six of the 76 Goats' cheese samples contained a significant amount of sheep's cheese
food + drink
News
Russell Brand arriving for the book launch in East London
peopleRussell Brand cancels his book launch debate due to concerns about the make-up of the panel
Arts and Entertainment
Contestants during this summer's Celebrity Big Brother grand finale
tvBroadcaster attempts to change its image following sale to US
PROMOTED VIDEO
Arts and Entertainment
Julianne Moore and Ellen Page are starring together in civil rights drama Freeheld
film
Arts and Entertainment
Sarah Dales attempts to sell British Breeze in the luxury scent task
tvReview: 'Apprentice' candidates on the verge of tears as they were ejected from the boardroom
Voices
New look: Zellweger at Elle's Women in Hollywood awards on Monday
voicesRenée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity, says Amanda Hess
Arts and Entertainment
film

Marvel has released the first teaser trailer a week early after it leaked online

Extras
indybest
Life and Style
CHARGE BOOSTER: Aeroplane mode doesn't sound very exciting, but it can be a (phone) hacker's friend. Turning on the option while charging your mobile will increase the speed at which your phone battery charges
techNew book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone
Sport
Christiano Ronaldo enjoys his opening goal
champions leagueLiverpool 0 Real Madrid 3: Ronaldo and Benzema run Reds ragged to avenge thrashing from their last visit to Anfield
Arts and Entertainment
Awesome foursome: Sam Smith shows off his awards
music22-year-old confirms he is 2014’s breakout British music success
Arts and Entertainment
Sir Nicholas Serota has been a feature in the Power 100 top ten since its 2002 launch
art
News
Call me Superman: one of many unusual names chosen by Chinese students
newsChinese state TV offers advice for citizens picking a Western moniker
News
ebooksAn unforgettable anthology of contemporary reportage
News
Wilko Johnson is currently on his farewell tour
people
News
Let’s pretend: KidZania in Tokyo
educationKidZania lets children try their hands at being a firefighter, doctor or factory worker for the day
News
i100
Voices
'Irritatingly Disneyfied': fashion vlogger Zoella
voicesVicky Chandler: Zoella shows us that feminism can come in all forms
Life and Style
health
Latest stories from i100
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

IT Systems Business Analyst - Watford - £28k + bonus + benefits

£24000 - £28000 per annum + bonus & benefits: Ashdown Group: IT Business Syste...

Trainee Recruitment Consultant - Birmingham - Real Staffing

£18000 - £23000 per annum + Commission: SThree: The SThree group is a world le...

Trainee Recruitment Consultant Birmingham

£18000 - £23000 per annum + Comission: SThree: The SThree group is a world lea...

Trainee Recruitment Consultants

£20000 - £25000 per annum + OTE £Competitive: SThree: SThree Group and have be...

Day In a Page

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?

A crime that reveals London's dark heart

How could three tourists have been battered within an inch of their lives by a burglar in a plush London hotel?
Meet 'Porridge' and 'Vampire': Chinese state TV is offering advice for citizens picking a Western moniker

Lost in translation: Western monikers

Chinese state TV is offering advice for citizens picking a Western moniker. Simon Usborne, who met a 'Porridge' and a 'Vampire' while in China, can see the problem
Handy hacks that make life easier: New book reveals how to rid your inbox of spam, protect your passwords and amplify your iPhone

Handy hacks that make life easier

New book reveals how to rid your email inbox of spam, protect your passwords and amplify your iPhone with a loo-roll
KidZania lets children try their hands at being a firefighter, doctor or factory worker for the day

KidZania: It's a small world

The new 'educational entertainment experience' in London's Shepherd's Bush will allow children to try out the jobs that are usually undertaken by adults, including firefighter, doctor or factory worker
Renée Zellweger's real crime has been to age in an industry that prizes women's youth over humanity

'Renée Zellweger's real crime was to age'

The actress's altered appearance raised eyebrows at Elle's Women in Hollywood awards on Monday
From Cinderella to The Jungle Book, Disney plans live-action remakes of animated classics

Disney plans live-action remakes of animated classics

From Cinderella to The Jungle Book, Patrick Grafton-Green wonders if they can ever recapture the old magic
Thousands of teenagers to visit battlefields of the First World War in new Government scheme

Pupils to visit First World War battlefields

A new Government scheme aims to bring the the horrors of the conflict to life over the next five years
The 10 best smartphone accessories

Make the most of your mobile: 10 best smartphone accessories

Try these add-ons for everything from secret charging to making sure you never lose your keys again
Mario Balotelli substituted at half-time against Real Madrid: Was this shirt swapping the real reason?

Liverpool v Real Madrid

Mario Balotelli substituted at half-time. Was shirt swapping the real reason?
West Indies tour of India: Hurricane set to sweep Windies into the shadows

Hurricane set to sweep Windies into the shadows

Decision to pull out of India tour leaves the WICB fighting for its existence with an off-field storm building
Indiana serial killer? Man arrested for murdering teenage prostitute confesses to six other murders - and police fear there could be many more

A new American serial killer?

Police fear man arrested for murder of teen prostitute could be responsible for killing spree dating back 20 years
Sweetie, the fake 10-year-old girl designed to catch online predators, claims her first scalp

Sting to trap paedophiles may not carry weight in UK courts

Computer image of ‘Sweetie’ represented entrapment, experts say
Fukushima nuclear crisis: Evacuees still stuck in cramped emergency housing three years on - and may never return home

Return to Fukushima – a land they will never call home again

Evacuees still stuck in cramped emergency housing three years on from nuclear disaster
Wildlife Photographer of the Year: Intimate image of resting lions claims top prize

Wildlife Photographer of the Year

Intimate image of resting lions claims top prize
Online petitions: Sign here to change the world

Want to change the world? Just sign here

The proliferation of online petitions allows us to register our protests at the touch of a button. But do they change anything?