Special Report on Peps and tax Planning: Best buys and special offers: There are plenty of bargains and deals to be found, if you know where to look for them, reports Christine Stopp

WITH ONLY three weeks left to use up your 1992/93 PEP allowance, you may be looking around for a promising plan. The hunt is on by plan managers to grab a share of the pre-year end rush, which means there are new ideas and many special offers.

Most of these are simply special discounts on the initial charge of the PEP plan. Some run over the end of the tax year, the discount lasting until the end of April or May - if they miss you this year they'll try and grab you next.

With income from the building societies on decline, and the stock market almost topping deposit rates, there has been a crop of PEP plans from major groups specially designed to produce an attractive income. An income strategy is in any case best for the smaller PEP investor who has little chance of using up the capital gains tax benefits.

One approach has been to use the highest possible percentage of fixed-interest stocks in the portfolio, which increases yield, although reduces the possibility of strong capital gains. The Fidelity Tax-Free Income Plan uses this strategy, achieving a yield of 6 per cent a year after tax. Income can be reinvested or paid out monthly to the investor.

Fidelity has a special low PEP charging structure - a 2 per cent initial charge and a 1.25 per cent annual charge. A withdrawal charge is levied on withdrawals made within three years.

Mercury is offering a 1 per cent discount on its Income Fund (yielding 5.2 per cent on March 1) until the end of the tax year. The plan, which pays dividends twice yearly, comes with an unashamed investor perk - 600 free Air Miles, which is enough for a free return flight to Paris or Amsterdam. Henderson's new Extra Income Plus PEP uses the group's Extra Income Trust, Henderson Highland investment trust, and a number of high-yielding shares to give quarterly dividends. The initial charge is 3 per cent if the unit trust only option is chosen.

More complicated is the Hypo Foreign & Colonial High Income Plan, which is designed to pay 10 per cent a year after charges within the PEP. Income can be paid monthly and the fund uses option contracts to protect the income and also the capital value of the fund against stock market volatility. Because of the large proportion of the portfolio used to produce income and buy options, prospects for capital growth on this fund will be reduced.

Unit trust groups offering special terms on a general range of PEPs include Martin Currie, with a 2 per cent discount on the group's nine unit trusts until March 26. Prolific is also giving a 1.25 per cent bonus on its whole fund range until April 5.

Invesco MIM is reducing the initial charge to 3 per cent until April 5 on some of its TaxHaven range of PEPs and free share exchange is also available. No-

frills stockbroker Sharelink is offering a 2.5 per cent discount on UK and European index funds from Gartmore.

Investment trust special offers include the Witan PEP, which has dropped its initial charge altogether, and Fleming Mercantile, with no initial charge before March 29 and free share exchange until March 11.

A number of investment trusts offer a very cheap way into a PEP. Alliance, for example, will invest your money in a wide range of trusts run by different managers, with no charge except dealing costs. Dunedin, Law Debenture, Murray Johnstone and SAINTS will all charge under pounds 100 to invest and manage a full PEP for a year. Some groups charge over pounds 300 for the same service.

Investors should remember that charges are not the only factor to consider - low charges are no benefit if performance is poor.

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