Personal Equity Plan Transfers

PEP

What is it?

A Personal Equity Plan (PEP) is a tax efficient investment offering access to a wide range of  investments.  Such investments include:

• Company shares
• Corporate bonds
• Collective Investment Schemes such as Investment Trusts, Unit Trusts and Open Ended Investment Companies (OEICs)

PEPs were replaced by Individual Savings Accounts (ISAs) in April 1999 meaning no further contribution could be made, however transfers of existing funds are allowed between PEP providers.

Who is it for?

A PEP transfer enables investors to continue participating in tax efficient funds accrued through previous PEP investments (including single company PEPs), whilst consolidating these funds with one PEP manager, thus providing:

1. Potentially easier administration
2. Re-alignment of previous investments in line with current risk profile
3. Opportunity to increase access to other fund providers not available through current provider via 'Wrapper Platforms'

How do they work?

Previously held funds within the PEP are transferred to a new Provider.

Contributions invest in ‘units’ of the fund selected, the price of which will reflect the value of the underlying investments. A professional fund manager (or managers) then manage the investments.  No further contributions are allowed to the fund.

The full list ‘qualifying investments’ that may be held within a PEP include:

• UK Ordinary Shares Qualifying European Community (EC) Shares
• Corporate Bonds
• Preference shares of non financial companies and securities
• Authorised Unit Trusts (excluding futures & option funds, property funds and warrant funds)
• Open Ended Investment Companies (OEICs)
• Investment Trusts

You can encash your money out of a PEP at any time, without losing the tax relief. You do not have to declare any income and/or capital gains from the PEP investments, or tell your Local Tax Office that you have a PEP investment.

What is the tax position?

Similarly to ISA’s, PEP’s can longer reclaim dividend tax credits and have not been able to do so since April 2004.

There is no Capital Gains Tax (CGT) on a PEP either within the fund or against the proceeds.  Conversely, any losses  incurred within a PEP cannot be offset against other gains.

NB...The favourable tax treatment currently available for PEPs might not continue in the future.