PEP - but what do I do with it?

[milliec]

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A PEP is what an ISA used to be. it's basically a tax free savings account - the interest grows free of tax. It's probably worth contacting the bank/building society/whoever who the PEP is with and asking the interest rate. You may be able to get a better rate elsewhere.

The other option is investing in stocks and shares, but I would only do that if you can afford to leave the money invested for at least 5 years, and stocks and shares will fluctuate over the short term, only out-performing savings over the long term (as a rule of thumb).

Finally, if you have any debts that have a higher interest rate than you're getting on the savings, you're better off paying them off.

Any more questions, I'll try to help...

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Ah, in that case it's a stocks and shares PEP. It might be worth having a quick check about the company is investing your money in, and what the returns have been for the past 5 years (the company can probably provide you with this). You'll then be able to get some idea of how the fund is performing over the long term, and decide whether you want to leave it in the PEP (probably sensible, particularly if the money isn't needed any time soon), or move it to a risk free cash ISA, or to another stocks and shares ISA (probably only worth it if you want to take some interest in the investments).

Actually a PEP could only ever be stocks and shares - it was a Personal Equity Plan.

Rules have recently changed and PEPS, ISA's, TESSA's, TOISA's and all the rest have now been merged into ISA's - the company it is with will do this automatically. You need to find out what the underlying investment is - now is not a very good time to be taking money out of the stock market as share prices have fallen considerably, but there is no guarantee they won't fall even further in the short term, and if you didn't know it was there last year (when it would have been a better time to encash) then it's not like you've actually lost anything.