PEP/ISA CASE STUDY

The Client’s PEP/ISA Problem: This client had adopted a higher risk approach on PEP and ISA holdings as a counterbalance to her other more cautious investments. She was of the general feeling that her PEPs and ISAs had not performed well over 5 years, and wanted active management of the total holding in the future. The PEPs and ISAs were accumulated from the late 90s. They were a mixture of holdings as shown in the extract below from our client analysis report:

“To help you with this let us look first at how your funds have performed to date. Taking information from each of the companies below some information is as follows:

Company	12 months	3 years	5 years
Gartmore	25%	73%	39%
F&C	5%	26%	23%
Invesco (IE)	13%	51%	7%
Invesco (GP)	18%	68%	28%

The figures look at periods to June 30th 2006. As a yardstick over 12 months to June 30th 2006 the FTSE 100 has risen by 17%, over 3 years by 60% and over 5 years by 21%.

One company we favour – New Star - have achieved the following results over the same periods:

Company	12 months	3 years	5 years
New Star	23%	76%	48%

Performance is key and you will see that New Star comfortably outpace most of your existing funds over most of the periods shown.

A fund of funds service

You wonder if you should act to transfer some of the above holdings (retaining their PEP/ISA status) to a new investment manager? This would be with the aim of obtaining more hands on management as opposed to a holding of separate funds with no regular overview. This is in the context of your expectation that stock markets will continue to offer value over the next 5 years.

With this in mind we suggest you consider transferring these holdings to a fund of funds portfolio service such as that available from a company like New Star. There is no penalty or charge that is levied by any of your existing managers to transfer out the monies into the new Plan Manager.

Given that you want to remain in the higher risk sector transfer into such a service as this will provide:

1. Full “hands on” management.
   
   
2. Greater diversification of risk.
   
   
3. Allow for PEP/ISA transfer to preserve tax shelter status.

We have used these funds of fund managers for many years now (since 1999). The service has also out performed your existing holdings as you will see as well as that of the FTSE 100 index.”

This client duly decided to transfer her PEPs and ISAs as we recommended, so choosing to remain within the higher risk arena for this holding. Other cases show a preference to move towards medium risk and protected investment sectors. If you have not reviewed your PEPs and ISAs for some time then ask us for help.