PEP - Personal Equity Plans - PEP Up Your PEPs

Were you one of the many thousands of investors who, during the thirteen years that PEPs (Personal Equity Plans) were in existence, contributed towards the many billions of pounds that were ploughed into them? If so, it's probably time that you had a PEP talk with an IFA!

It's good to talk

The rules that applied to PEPs were restrictive when it came to constructing a balanced and diversified portfolio. A large proportion of whatever you invested in a PEP had to be held in either the UK or Europe. As a result, it is estimated that today the majority of all monies now held in PEPs are invested in UK funds. The fact that such a high percentage of private capital is invested in the UK means that these investments are totally at the mercy of the ups and downs of one stock market.

Rule changes

If you find yourself in this position, you may wish to consider how you could rebalance your portfolio through a PEP transfer. Put simply, this is the movement of your funds from one PEP manager to another. Now, the much more flexible ISA rules on where investor capital can be invested also apply to PEP transfers. Therefore, if you want to transfer your PEP out of a UK or European sector fund into one based in the US, Japan or an emerging market, there is nothing to stop you doing this.

The Treasury now also allows money you hold in single company PEPs to be bundled together with funds held in your general PEPs. This means that you can now move large sums from single to collective equity investments while still keeping them within a PEP, thereby reducing your exposure to risk.

Finally, let's not forget about partial PEP transfers. If your PEP is divided between a few funds - some good performers, others not - it's now possible to transfer out of the under-performing funds while retaining any investments that have paid off.