How best to invest in stocks and
shares
Investment trusts
Unit trusts
Offshore funds
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SHARES
Since 6 April 1999 Personal Equity Plans have been replaced by Individual Savings Accounts (ISAs) which work in a similar way.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 PEPs are no longer restricted to UK and EU securities and can invest in the same investments as ISAs. Also the distinction between Single Company and General PEPs have been abolished from that date.
Who can invest You can retain existing investments but cannot add to or take out a new one.
How worthwhile Good value for higher rate taxpayers. Best suited to a few shares.
Minimum Not applicable.
Maximum What is already invested.
Suitable Existing investments.
Money back Any time. If you die the plan ends and your money is returned. .
Interest Variable. Called dividend. The before tax interest is called the yield and shares which show the highest yield are most attractive as they make the most use of the tax exemption. Money on deposit awaiting investment is also tax free. The single share PEP must be invested within a few weeks but otherwise you can leave money on deposit indefinitely (you have to invest in shares before you cash, however).
Interest paid Your choice to accumulate within the plan or paid by cheque to you or to a bank account.
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 Varies, usually around ½% a year management charge in addition to dealingcharges when you trade. Stamp duty ½%.
Passbook None. Statements sent.
Children Not allowed.
Risk High. You should have a balanced portfolio of at least 7-10 shares in and out of the PEP and ISA unless you buy investment trusts.
How to invest Not applicable.
Where from Not applicable although you can still transfer to another PEP broker or indeed to a unit trust.
Other types of direct investment
in shares
Shares - A Beginners Guide to Making
Money
How best to invest in stocks and
shares
Investment trusts
Unit trusts
Offshore funds
Contents
Last updated 30 April 2001