Last Potential PEP Investors Go For Growth Despite Income Frenzy

Four out of five people who say they are likely to take out a Personal Equity Plan (PEP) before the April 5th deadline will be opting for a PEP to grow their capital over the long term, according to research by MORI Financial Services for Marks & Spencer Financial Services (M&SFS). Despite the income frenzy with falling interest rates the M&SFS research reveals that long term capital growth remains the aim for the majority of potential PEP investors.

Jenni Stott, Head of Marketing for Life, Pensions & Investments, said: "With falling interest rates and a number of new funds offering high rates of income it is not surprising that income has been the flavour of the month. However, it is important to remember that the majority of people save in a PEP to grow their capital tax-free over the long term.

Of those definitely or likely to take out a PEP before the deadline.

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• Eight in ten people (81%) who say they are either definitely or likely to take out a PEP before the deadline will be looking for a PEP to grow their capital over the long term. 13% are looking for a PEP that generates a regular income.
• When choosing which company to take out a PEP with, past performance is seen as the most important factor (68%).
• Over a quarter (28%) consider the level of charges to be one of the most important factors, when deciding which company to choose for a PEP.
• A third of people (32%) would approach companies direct for PEP information when deciding which PEP to choose, 35% would speak to their family, friends, colleagues or acquaintances to seek information and 24% would look to newspaper or magazine articles.

Jenni Stott continued: "The research shows that 1 in 3 people would approach companies direct for information on their PEPs, and we believe this is a further indication that people are taking increasing control of their financial decisions and looking more closely at past performance and charges. With Individual Savings Accounts set to highlight further cost and fair terms we believe this will continue to increase in the future. As with PEPs, M&SFS will continue to adopt a no-nonsense value for money approach to our savings products with the launch of ISAs."

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• Amongst people who already have a PEP for the final tax year taking advantage of tax free saving is the main reason given by over half (52%) for investing in a PEP. The next most common given reason for investing in a PEP is to help save for retirement(28%).

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• Over the past three years the fund has grown by 81.66% against a sector average of 49.28% and is ranked 4/130*
• Since its launch on 1 May 1995 the fund has grown by 98.4% against a sector average of 79.2% and is ranked 19/122*

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Technical details

The report is based on the findings of a survey conducted by MORI Financial Services for Marks & Spencer Financial Services. Interviews were carried out between 19 and 22 February 1999 among a total representative GB sample of 1,845