In 1987, it was in the bottom quartile.This goes to show how much active management can do for your cash if you hitch a ride with a good PEP fund. In 10 of the 20 years recorded, the All Share finished in the second quartile of returns (so in the top half of the performance table). The WM Company analysed the UK Growth & Income sector, where the funds can be compared directly with growth in the FT-SE All Share index of UK stock market-quoted companies.The question is whether you have a better chance of making lots of money by buying an actively managed PEP, where a manager selects shares using skill and judgement, rather than just buying a tracker fund, which follows the All Share index.Over the 20-year period, the position of the FT-SE All Share index at the end of each year varied hugely. "Over the entire period of the study, the probability of selecting a top-quartile performer based on historic top-quartile performance was no better than would be expected by chance ..." (my italics). A "top-quartile" unit trust is one which performs among a sector's top 25 per cent of funds.

You think I'm being flippant? Listen to what analysts at the WM Company had to say after studying returns from unit trusts (the stock market funds held inside your PEP) over the last 20 years Don't be put off by the jargon; this is dynamite. The guide tells you how to get the best PEP deal and gives advisers' tips for best buys.Write to PEP Offer, Personal Finance, Independent on Sunday, One Canada Square, London E14 5DL or e-mail your name and address to i.berwick independent.co.uk.. Question: How do you pick a good PEP? Answer: Gaze into your crystal ball. To find a local IFA call 0117-971 1177.Tony Bonsignore is news editor at 'Financial Adviser' magazine.Free PEP guide offerThe first 50 Independent on Sunday readers to e-mail or send in cards will receive a free copy of the Moneywise Which PEP? guide, worth pounds 3.50.

The extra return comes from the perceived extra risk of buying bonds issued by companies with a lower credit rating than those held in the more conservative funds.All PEPs are available cheaply through discount brokers: Chelsea, 0171- 351 6022; Elson, 0800 096 1111; Hargreaves Lansdown, 0117-900 9000; The PEP Shop, 0115-982 5105. They are geared towards paying an income rather than building capital, but many people re-invest the income into their PEP.Mark Dampier, head of research at Hargreaves Landsdown, an IFA, says newcomers should take a cautious view: "You should go for something with a decent yield but not too racy - CGU's Monthly Income Plus and Credit Suisse's Corporate Bond are two good funds."But if you want to get a higher return some bond PEPs are giving 8 per cent or more a year, tax free However, they do carry more risk. You buy the PEP and get most or all of the initial charge rebated. Most discount brokers (see below) are rebating the 4 per cent charge on Jupiter PEPs.You can sidestep some of the risk from shares by buying a corporate bond PEP. These funds invest in bonds (IOU notes) issued by large companies.