Personal Equity Plan (PEP)

What Was a Personal Equity Plan (PEP)?

A personal equity plan (PEP) was an investment plan presented in the United Kingdom that encouraged individuals beyond 18 years old to invest in British companies. Participants could invest in shares, authorized unit trusts, or investment trusts and receive both income and capital gains free of tax.

PEPs were replaced with Individual Savings Accounts (ISA) in 1999.

Understanding a Personal Equity Plan (PEP)

The PEP was intended to encourage investment by individuals. Many plans required a base amount to be invested, for example, \u00a3250 or \u00a31,000, contingent upon the type of plan and the plan manager's requirements. Among the incentives introduced to the public to encourage their participation in a PEP was the prospect of income and capital growth at a greater rate than certain other investment vehicles, for example, in the event that they laid out a deposit account with a building society.

The income from a PEP was tax-free, insofar as the invested funds stayed in the plan. Likewise with different types of equity investments, the value of the shares invested in through a PEP could rise or decline with market vacillations.

It was trusted that to see the best return on investment from a PEP, the funds ought to have stayed in place for as many as five years, in the event that not decade. Due to certain management fees and different charges that might have been applied, pulling out funds early might have discredited the gains they accrued.

PEP investments must be made through an authorized plan manager, who was responsible for the plan's all's administration.

In 1999, the PEP was discontinued for ISAs, another tax-efficient covering that offered greater assortment, including the option to park capital in a tax-free cash savings account. As PEPS were phased out, all excess plans were changed over by 2008 into ISAs.

Limits and Regulations on Personal Equity Plans (PEPs)

There was an annual contribution limit of \u00a36,000 for general, self-select PEPs. Single-company PEPs, in the mean time, had a limit of \u00a33,000 pounds in annual contributions. Under a solitary company PEP, just a single company could be invested in each tax year. With general self-select plans, individuals had different options for their investments, for example, shares, unconditional investment companies, corporate bonds, and investment trusts.

The investments made under self-select plans were directed by the individual, however a manager or firm was as yet expected to work with the plan, making the arrangement owner responsible for choosing where their funds ought to be applied. Managed PEPs, then again, were regulated by a professional manager who put together investment portfolios for the funds. Such instant plans permitted individuals without market aptitude to invest through PEPs.

Features

• The PEP was replaced by Individual Savings Accounts (ISA) in 1999 and is not generally offered.
• The personal equity plan (PEP) was a U.K.- based initiative intended to encourage domestic investment by individuals.
• The PEP gave certain tax incentives to advance individual investment in stocks.