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How best to invest in stocks and shares
INVESTMENT TRUST
(Also called Investment Trust PEP)
Since 6 April 1999 Personal Equity Plans have been replaced by Individual Savings Accounts (ISAs) which work in a similar way. Existing PEP holdings can remain. Since 6 April 2001 PEP rules allow investment in the same types of investments as ISA's; the main difference is that trusts specialising in shares outside the EU will become eligible. Since that date there is no longer be a distinction between single company and general PEPs.
Who can invest You can retain existing investements but cannot add to or take out a new one.
How worthwhile Good value for higher rate tax-payers. Compare with Unit Trust Personal Equity Plan. Higher rate tax-payers, see also Shares Self-Select Personal Equity Plan.
Minimum Not applicable.
Maximum What is already invested.
Suitable Existing investments.
Money back 10 days after you sell. Managers don't usually deal every day. You get the market price when you sell. If you die the plan ends and your money is returned. From 6 April 2000 you will be able to transfer part or all of a PEP to a different manager (previously only a transfer of the whole amount was allowed).
Interest Variable. Called dividend. The before tax interest is called the yield and trusts which show the highest yield are most attractive as they make the most use of the tax exemption.
Interest paid Dividends can be accumulated by being invested in more shares; or they can be paid by cheque to you or to a bank account half-yearly, quarterly or yearly.
Tax Income is taxed at 10% on shares; nil on stocks; 20% on money on deposit awaiting investment. Nothing need be entered on a tax return. The 10% tax credit attached to the dividend is reclaimed by the manager on your behalf and credited to your account. This tax credit will be abolished from 6 April 2004. Capital gains are tax exempt.
Fees to pay When you buy stockbrokers commission from nil to 1.65%, stamp duty ½%. Initial set-up charge nil to 3% or fixed charge £5 to £50. Yearly management charge nil-1½%. When you sell stockbrokers commission only.
Passbook None. Statements sent, monthly, half-yearly or yearly.
Children Not allowed.
Risk High but not as risky as buying individual shares. The value of the share can go down as well as up.
How to invest Not applicable.
Where from Your existing provider.
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Last updated 30 April 2001