Started 11 years ago as a subsidiary of Virginia-based Signet Bank and spun
Started 11 years ago as a subsidiary of Virginia-based Signet Bank, and spun off in 1994 It has 18 million customers in the US.Bank One. Based in Chicago, Bank One is the fifth-largest bank in the US, with assets of more than $260bn (pounds 158bn).InvestmentsMorgan Stanley Dean Witter. MSDW has only just started to target private investors in the UK, but is one of the longest-established fund managers in the US.Johnson Fry One of the UK's last remaining independent fund managers. It manages more than pounds 1bn.Colonial First State Investments. Colonial, its parent company claims to be Australia's fastest growing financial services provider Worldwide, the group manages more than pounds 17.5bn.. When I acquired windfall shares from a building society a couple of years ago I took the opportunity of placing them in a single-company PEP It seemed the obvious thing to do at the time. Recently, the PEP's management charges were increased, and I now wonder what I am paying for.
Is there any real advantage in having a PEP? I am a basic-rate taxpayer. WB, Yorkshire The case for some PEPs, especially share-based PEPs, has always been debatable and is more so now. The same applies to the ISA tax shelter that replaced the PEP on 6 April.Share-based PEPs invariably levy separate PEP charges. And if you have to pay charges in order to save tax, do you make a net tax saving after deducting charges? Many people make no net saving even on very low-charging single-company PEPs. Many undoubtedly pay more in charges than they will ever save in tax.If you are a basic-rate taxpayer, compare the charges with the income tax saved.
Since 6 April the value of the income tax saving has been halved from 20 per cent to 10 per cent of the gross share dividend. Having your shares in a PEP gives you an extra pounds 1 for every pounds 9 you would otherwise get.Many share-based PEP fees are based on the capital value of your shares. If those shares have increased in line with recent rising stock markets, the PEP charge will have gone up (quite apart from any increase in the percentage management charge). But dividends have not gone up in the same proportion, so neither has the tax saving.PEPs also save capital gains tax (CGT). But if you eventually sell the share outside a PEP, you'll be able to use your annual CGT allowance, currently pounds 7,100.You may also be able to claim other reliefs - indexation allowance and taper relief.Share-based PEPs and ISAs are most likely to benefit higher-rate taxpayers, especially if they also have substantial investments and would incur CGT bills without the PEP tax shelter Before closing a PEP, find out what happens to your shares They may simply be transferred to you. But the terms and conditions of the PEP might state that the shares will be sold and you will get cash.