Individual Savings Account uk, Individual Savings Account

PEP and ISA Transfers

This is a wake up call for all those investors who have invested in PEPs and ISAs over a number of years.

When markets are savaged by price falls as we have seen in recent months, we prefer to shut our eyes and do nothing. The psyche works like this: we’ve missed the opportunity to sell and so we wait for prices to recover.

So WAKE UP! It’s not enough just to sit back and wait. It’s worth reminding ourselves of these two simple but vital facts:

For the market to recover all the lost ground since March 2000 (it’s fallen by 45%), share prices have to rise by over 80%.
If you are invested in a unit trust, the managers’ charges continue to erode the depleted value of your investment.

Address these two issues and you will lessen the pain of this bear market and improve the rate of recovery in your fortunes.

You bought your investments in a totally different market environment, so the chances are that they are not going to give the best result when share prices start to rally, as they most certainly will. For example: technology shares could recover well when share markets improve. But this won’t be automatic: the manager of the fund you bought could be stuck in shares which he just cannot sell. Worse still, the chances are he’s raised cash to pay out redeeming unitholders by selling the easily marketable technology shares in his portfolio. This means the quality of the remainder will have deteriorated to a point that the fund won’t get the benefit of the recovery when it comes.

And what about charges? There seems no logic in paying high charges to a fund manager to pick the shares that will go when share prices keep on falling! High charges simply make your job of clawing back value that much harder.

PEP and ISA transfers are straightforward and simple to arrange and they preserve your tax freedom from capital gains. That may not seem worth much right now, but when markets do recover – as they will – you will appreciate yet again the benefits of that exemption.

To access or request a Transfer form to transfer your PEP or ISA to one of Legal & General's Index Trusts, click here.

For further information about trackerfunds.com click here.