Ethical concerns in PEP world

By THIS IS MONEY
Updated:

 

I have had a Friends Provident ethical PEP since 1998. It has gone down in value and has only recently returned to its initial value. Can I still keep it or must I swap it for an ISA? Can I add to it? Given its lacklustre performance would I be better off getting rid of it and investing elsewhere in an ethical fund? BW, Kingston-upon-Thames.

Kim North, Independent Financial Advisor at Pretty Financial, says: You can still keep it, but you can no longer add to it. As for selling it, I would say wait. If you want better returns you would have to go for a non-ethical fund instead.

The Stewardship Fund, which I assume is the one you are in, is a mid-performer among the top 12 ethical funds and it is resolutely ethical.

Over the last three years all of the ethical funds have been beaten by non-ethicals except the ethical funds from NPI, but if you are interested in investing there check carefully that they fit your ethical criteria.

I think the performance of ethical funds in general will pick up in the near future because they have been suffering over the last few years as investors have favoured hi-tech shares instead of the ethical and green-tinged shares which ethical fund managers typically invest in.

However, the recent jolt in tech shares could spell better times around the corner for ethical funds as more traditional equities return to favour.

If you really want to change you can do a PEP transfer. Ask for a PEP transfer form from the provider that you wish to move to, send it back to them and they will do the transfer for you. You will face initial charges for going into the new PEP that vary from 2% to 5%.

It is cheaper if you go through an independent financial advisor who is able to secure discounts. This need not always be a discount broker. There are advisers who can get you transfers at the same level of charges as discount brokers but can also offer you advise about the ethical stance of funds.

Most watched Money videos