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Personal Finance: Thousands set to miss deadline for Peps.

A "staggering" 200,000 savers may miss the deadline for this final year of Peps because of the timing of the Easter weekend.

This calculation comes from Mr Graham Hooper of independent financial advisers Chase de Vere, who fears that over pounds 1 billion of Pep sales could be lost because would-be investors may not notice until too late that the 1999-2000 tax year falls on Easter Monday.

"Human nature being what it is, most people leave things to the last minute," he says.

"We are really worried that investors really haven't taken account of the Easter bank holiday and will miss out on their Pep allowance."

That would be an unfortunate lost opportunity for financial advisers like Mr Hooper and for the fund management companies who have lavished colossal budgets to publicise the theme that this is the last chance to buy Peps before they are supplanted by Chancellor Gordon Brown's Individual Savings Accounts.

Whether it is quite such a disaster for the Pepless 200,000, should they materialise, is more arguable.

Don't get me wrong. I've been buying Peps since the mid-80s and am delighted with the result. I have done so again this year, too.

But before you succumb to the advertisers' message "Hurry, hurry, while stocks last", it is as well to face the fact: Mr Brown has taken a big bite out of the tax breaks that come with a Pep.

For most people, these consist of not paying income tax on the dividends - by reclaiming the 20 per cent that has been deducted from them for advance corporation tax.

But from April 6 there will be no ACT to reclaim. Mr Brown has abolished it.

To soften the blow for Pep investors he is providing a sweetener of ten per cent of their dividends, but for five years only.

For most Pep holders one-tenth of the dividends will not be enough to cover the Pep manager's charges - although there is still likely to be a marginal advantage for higher-rate taxpayers.

The odd thing is that while removing the most popular tax attraction of Peps - and his new Isas - invested in shares and share-based investment packaged like unit trusts, he left it intact on the interest on corporate bond Peps.

That is not necessarily an over-powering reason to buy a corporate bond Pep. It is not, as some people suppose, something like a tax-free building society account.

The capital value can, and does, fluctuate, although usually less than an investment in shares. It is much less likely to grow, however, because the interest on corporate bonds is fixed, while dividends on shares are raised so long as a company does reasonably well when a company does well.

Most of the time, the value of bonds rises when interest rates fall - as they have dramatically since last October - and drops when interest rate rise, which one day they will.

If you want a bit of tax-free income to boost a pension, say, there is a lot to be said for a corporate bond Pep - or Isa. But don't expect it to give you a capital killing to pay for your next car.

As to the deadline, if you really do cut it fine several Pep providers are paying their staff generous overtime to keep their offices open until midnight to accept completed forms and cheques.

M&G will have a couple of helpful souls right up to the last minute at the Metropole Hotel in the National Exhibition Centre complex.

Fidelity and Gartmore are doing likewise, though only at offices in southern England.

Fidelity, which claims its PEP sales are running 50 per cent ahead of last year's, is offering a telephone service - though only for people who have already bought a Fidelity Pep. Those who have not subscribed the pounds 6,000 maximum can top up their investment by phone on 0800-41-41-61.

Charles Schwab , the execution only broker, is staffing its Investment Centre in Birmingham until midnight.
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Publication:The Birmingham Post (England)
Date:Mar 27, 1999
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