You're first in line with bond PEPs

IF EVER an investment has found its moment, it is the corporate bond PEP. With stock markets in decline, gilts and fixed-interest stocks are increasing their appeal to investors, especially those looking for a reasonable income.

Corporate bond PEPs give investors a reasonable level of tax-free income and the possibility of capital gains. Although they have only been available since July 1995, there are now more than 60, mostly yielding between 5.5 and 7 per cent or more, free of all income and capital gains tax .

Less risky than traditional PEPs, their unit prices tend to be less volatile as they invest in fixed-interest bonds and stock. These are, in effect, IOUs issued by companies with regular payment of interest and the issuers promising to repay capital on a fixed date.

These are issued in various forms including debentures, Euro-bonds, preference shares and convertibles. The interest must be paid on them before a company can offer dividends to ordinary shareholders.

You can create a self-select corporate bond. But as this is very much a professional's market, investors should look to managed portfolios.

While corporate bond PEPs offer a low-risk investment, this does not mean no risk. If a company goes bust, loans cannot often be repaid. In practice this is unlikely to happen because only blue-chip companies issue corporate bonds.

To sort out the best corporate bond PEPs, look at the yields but also take the charges into account. Then, as income is the main concern, those with the least risk will have the most appeal. Less conservative managers invest in convertibles and preference shares, but in falling markets these suffer alongside ordinary shares.

Remember, you can transfer PEPs into a corporate bond PEP. So this could provide you with a safe parking space for any profits you have made during the current turbulence.

recommended corporate bonds

Recommendations of independent financial advisers

Fidelity Moneybuilder Income: minimum investment pounds 3,000; initial charge 5.25%; annual charge 0.7% from income. Tel: 0800 414161.

M&G Corporate Bond PEP: minimum investment pounds 1,000; withdrawal charge of 4.5% reducing to nil after five years; 1% annual charge from income. Tel: 01245 39039.

CGU Monthly Income Plus: minimum investment pounds 5,000 to receive monthly income; initial charge 4%; annual charge 1.25% from income. Tel: 0181- 681 222.

Standard Life: minimum charge pounds 1,000; initial charge 4%; annual charge 0.95% from income. Tel: 0800 333353.

Virgin Income: minimum investment pounds 1,000; no initial charge; 0.7% annual charge from income. Tel: 0345 959595.

Start your day with The Independent, sign up for daily news emails
PROMOTED VIDEO
ebooks
ebooksA year of political gossip, levity and intrigue from the sharpest pen in Westminster
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

Ashdown Group: Client Services Manager - Relationship Management - London

£30000 - £32000 per annum + benefits : Ashdown Group: A highly successful, int...

Recruitment Genius: Credit Controller / Customer Service

£18000 - £20000 per annum: Recruitment Genius: This rapidly expanding business...

Guru Careers: In-House / Internal Recruiter

£25 - 28k + Bonus: Guru Careers: An In-house / Internal Recruiter is needed to...

Recruitment Genius: Tax Assistant

Negotiable: Recruitment Genius: A Tax Assistant is required to join a leading ...

Day In a Page

Syria crisis: Celebrities call on David Cameron to take more refugees as one young mother tells of torture by Assad regime

Celebrities call on David Cameron to take more Syrian refugees

One young mother tells of torture by Assad regime
The enemy within: People who hear voices in their heads are being encouraged to talk back – with promising results

The enemy within

People who hear voices in their heads are being encouraged to talk back
'In Auschwitz you got used to anything'

'In Auschwitz you got used to anything'

Survivors of the Nazi concentration camp remember its horror, 70 years on
Autumn/winter menswear 2015: The uniforms that make up modern life come to the fore

Autumn/winter menswear 2015

The uniforms that make up modern life come to the fore
'I'm gay, and plan to fight military homophobia'

'I'm gay, and plan to fight military homophobia'

Army general planning to come out
Iraq invasion 2003: The bloody warnings six wise men gave to Tony Blair as he prepared to launch poorly planned campaign

What the six wise men told Tony Blair

Months before the invasion of Iraq in 2003, experts sought to warn the PM about his plans. Here, four of them recall that day
25 years of The Independent on Sunday: The stories, the writers and the changes over the last quarter of a century

25 years of The Independent on Sunday

The stories, the writers and the changes over the last quarter of a century
Homeless Veterans appeal: 'Really caring is a dangerous emotion in this kind of work'

Homeless Veterans appeal

As head of The Soldiers' Charity, Martin Rutledge has to temper compassion with realism. He tells Chris Green how his Army career prepared him
Wu-Tang Clan and The Sexual Objects offer fans a chance to own the only copies of their latest albums

Smash hit go under the hammer

It's nice to pick up a new record once in a while, but the purchasers of two latest releases can go a step further - by buying the only copy
Geeks who rocked the world: Documentary looks back at origins of the computer-games industry

The geeks who rocked the world

A new documentary looks back at origins of the computer-games industry
Belle & Sebastian interview: Stuart Murdoch reveals how the band is taking a new direction

Belle & Sebastian is taking a new direction

Twenty years ago, Belle & Sebastian was a fey indie band from Glasgow. It still is – except today, as prime mover Stuart Murdoch admits, it has a global cult following, from Hollywood to South Korea
America: Land of the free, home of the political dynasty

America: Land of the free, home of the political dynasty

These days in the US things are pretty much stuck where they are, both in politics and society at large, says Rupert Cornwell
A graphic history of US civil rights – in comic book form

A graphic history of US civil rights – in comic book form

A veteran of the Fifties campaigns is inspiring a new generation of activists
Winston Churchill: the enigma of a British hero

Winston Churchill: the enigma of a British hero

A C Benson called him 'a horrid little fellow', George Orwell would have shot him, but what a giant he seems now, says DJ Taylor
Growing mussels: Precious freshwater shellfish are thriving in a unique green project

Growing mussels

Precious freshwater shellfish are thriving in a unique green project