PEPS: Pick up a plan down the line

If you've done some research, you can cut costs by buying direct, writes David Burrows

PEP managers are surpassing themselves in their bids to encourage sales before the 5 April deadline. M&G is even setting up special centres, sending its staff to Holiday Inns around the country on Easter weekend to receive application forms up to the last minute.

If you know which fund manager and which fund you want to invest in, you can pick up the phone or get on the internet to buy without fuss.

If you aren't sure what to buy, you may want to see an independent financial adviser. The advantage of using an IFA is that he or she should be able to highlight the PEP that best suits your requirements.

The downside is that you have to pay for the advice, although many people don't realise it; the payments are taken out of your lump-sum PEP cheque. You can put up to pounds 6,000 into a general PEP, and from next month you will be able to put pounds 7,000 into a new Maxi ISA, which is basically a PEP by another name.

Many people don't want to see an IFA and may feel inclined to buy direct over the phone from the big players such as M&G, Fidelity and Perpetual. These firms do have special offers that cut down the initial charges, but because they depend on IFAs for a lot of their business they can't be seen to seriously undercut the service the advisers are offering.

So instead the managers do bulk deals (which they often don't publicise) with discount broking firms. These companies shift millions of pounds' worth of personal equity plans to those "in the know" and undercut everyone else when it comes to cutting the initial charges, which can be as high as 6 per cent if you go to an IFA or the PEP manager.

With a little homework you you should be able to choose a PEP to suit your own risk profile and income/capital requirements, and then buy it from a discounter.

The internet is great for would-be PEP investors in a hurry. As a recent PEP purchaser I found it helpful in giving me some idea of what was out there in the market.

Most sites are free and easy to follow. I recommend www. moneyworld.co.uk, which gives up-to-date PEP performance statistics, quotations, names of discount brokers and full details of all providers, including the direct operations.

Interactive Investor is another useful site, at www.iii.co.uk. The site is well signposted, showing fund performance in its PEP Centre. It also offers a "find an IFA" service if you are looking for advice. Allenbridge, a discount PEP broker, has an excellent website at www.allenbridge.co.uk.

If you don't have internet access, the discount brokers will send you lots of useful graphs and guides. There are also plenty of reference posts to point you in the right direction. Chase de Vere publishes a PEP guide (pounds 12.95) which is very useful (credit card hotline, 0800 526092; free PEP advice line, 0800 526091).

If you are really bold, you can actually buy your 11th-hour PEP over the net. The one provider that only trades over the web is NetPep (www.netpep.co.uk). There is no advice given but you do get the benefit of low charges and fast set-up of your plan.

Major providers such as Fidelity also offer PEPs over the net but you won't save money this way.

A final word of warning: don't feel under pressure to buy the personal equity plans on offer at your bank.

The high-street banks can only sell their own products and the quality varies. Compare what's on offer to what you see in the market. And you won't save cash by buying from the bank.

For those more inclined to follow the tracker fund route, there is a strong argument for buying from the execution-only PEP players such as Virgin Direct.

Some discounters give a small incentive on Legal & General's tracker fund (Chelsea Financial Services is one).

You should approach both managers and discounters about investment trust personal equity plans (see facing page for more on this cheap and effective choice).

n Discounters: Chelsea, 0171-351 6022; PEP Direct, 0800 413186; Elson, 0800 096 1111; Hargreaves Landsdown, 0117 980 9930.