Investors can now put a minimum of pounds 50 a month into the plan in the same way that they might put money into a building society account. The Virgin Direct PEP, which is managed by Norwich Union, was launched last March for lump-sum investors with a minimum of pounds 1,000. So far, it has raised pounds 60m through the sale of almost 15,000 plans.
Gartmore Fund Managers also announced this week that it is launching a savings version its index-tracker, the UK Index Fund PEP.
Both funds are charging pounds 2 for each monthly contribution. That works out at 4 per cent on pounds 50-a-month contributions and 0.4 per cent on pounds 500 a month. These compare with charges of around 5 per cent for other PEPs. There are no monthly charges on contributions above pounds 1,000.
Both PEPs will also levy a management charge of 1 per cent a year, against an industry average of 1.4 per cent.
In addition, Gartmore has a bid-offer spread - the difference between the unit buying and selling price - of 0.5 per cent. Virgin, on the other hand, has a 0.5 per cent exit fee charged on the final gross sum, which it says is used to pay stamp duty.
So if the fund has doubled in value, the investor will end up paying 1 per cent of the original capital.
The Virgin brand name is expected to encourage a huge response to the regular savings plan. But many are questioning whether a tracker fund is the best home for young people's monthly savings.
Mark Mathias, business development director of Henderson Touche Remnant, which runs regular contribution plans on its own funds, says the first- time investor looking for growth could do better elsewhere. He says the Virgin and Gartmore trackers are restricted to the UK, and cannot therefore profit by investing in the world's faster-growing economies.
He points out that the average international general investment trust has outperformed the FT-SE All Share over three, five and 10 years.
''Spreading an investment across markets diversifies risk amongst a number of economies that may be at different stages in the economic cycle.
"The result will be a less volatile investment,'' maintains Mr Mathias.Reuse content