pg_update and encoding

[Graeme]

Preparing to use pg_update, I used initdb to create the new pgsql/data, 
but pg_update has exited with

encodings for database "template1" do not match:  old "UTF8", new 
"SQL_ASCII"

Should I delete pgsql/data and re-create with initdb -E "UTF8"?

Thanks,

Graeme