For some people they will, but for others they will not.There are two tax savings offered by a PEP: one is on capital gains tax (CGT), and the other is on the tax payable on dividends.CGT is payable only on capital gains over pounds 6,800 in a year so, for many people, single company PEPs offer no benefit here. Investors looking for a short- term investment should try elsewhere.The second concern about the suitability of single company PEPs is over the value of the tax breaks that they offer, and whether these outweigh their initial fees and management charges. And some single-PEP providers will offer to manage the investment for you, buying and selling shares in an effort to maximise your return.But dealing charges and stock market volatility mean you should expect to hold shares for a minimum of five years. You can sell the shares in a single company PEP and switch to another company’s shares so long as you do not hold cash for more than 42 days. Investments should be diversified to spread risk.Investors also need to remember that shares in single company PEPs should be viewed as long-term investments.

For wealthy investors this may not be a worry: they will have other investments, and the relative risk will be small.But for most people pounds 3,000 is a lot of money, and investing it all in a single company PEP is a bad idea. This makes them a risky investment.If you invest the allowed annual maximum of pounds 3,000, its return will depend entirely on the fortunes of your chosen company. First, each year’s single company PEP requires direct investment in the shares of only one company. As the end of the tax year approaches, investors appear to be flooding into them. Fidelity says its sales of single company PEPs from the start of the year to 10 February are up 223 per cent on the similar period last year.But single company PEPs are not suitable for everyone, and they are far less popular than general PEPs, even taking into account this year’s rush.Jason Hollands, managing director of BESt Investment, the financial advisers, says: “Single company PEPs are not appropriate for the vast majority of private investors.”There are two reasons single company PEPs are often unsuitable. Is it worth getting one? Is it a suitable investment? Which PEP manager and which shares offer the best prospect of a healthy return?

Answers to these questions are easy to understand, but one must remember that a single company PEP is a more specialist investment than a general one.
They need careful consideration.

SINGLE COMPANY PEPs offering the prospect of tax-free investment present several questions. “Many of those making some contribution during this consultative process welcomed these proposals, but this change of wording amounts to a dilution of what was originally proposed,” says Ms Eldridge.”The question now is whether any substantive change for the better will come out of all of this.”. These could be laid out in a statement of investment principle.But in a further consultative document in January that has been changed to a bare statement of whether trustees should be allowed to mention “any considerations other than financial ones” in their statement of the investment principles under which they run a fund. Also, in the case of defined benefit pension schemes – those set up to pay pensions which are equivalent to fractions of final salary – the employer company may be liable for any underfunding.”One can argue that in certain circumstances comparing the [ethical] policies of two similar firms when deciding which one to buy shares in is wholly congruent with acting in the best interest of scheme members.” This applies in what is called a “tie break” situation where a decision has to be made between two similar investments.A Green Paper in December suggested pension scheme trustees should feel able to consider moral social and environmental issues. Essentially, they must make investment decisions in the best interests of all scheme members. Anyone contracting out of the state top-up scheme, Serps, can also choose to have higher National Insurance contributions paid into a contracted out “appropriate personal pension” (APP) investing in an ethical fund.John Denham, the Pensions minister, is considering proposals that would require employers’ pension scheme trustees to disclose whether and how non-financial considerations might influence their conduct in running these funds.”This is an issue of key importance,” says Karen Eldridge of Eiris, “because of the very large amounts of investment capital held in UK pension funds and mostly invested into British company shares.”Common sense suggests that if pension scheme members elect to have their fund contributions invested according to given ethical or ecological guidelines, they should be allowed to do so.But Charles Scanlan, head of the pensions department at law firm Simmons & Simmons, says: “A pension fund is held in trust and run on behalf of its beneficiaries by trustees who are obliged to act in their best interests.”Trustees could be held legally liable if they fail in their duties.