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Suspension of various property funds

Fund managers have to make important decisions in order to protect the clients already invested in their funds. Due to difficult market conditions, the fund managers have decided to temporarily suspend the following funds:

  •  Aviva Investors Property Trust
  • BMO Property Growth & Income
  • Janus Henderson UK Property PAIF Feeder
  • Legal & General UK Property Feeder
  • Standard Life Investments UK Real Estate Feeder

This impacts clients who hold these funds directly via Retirement Account and indirectly through our (PAC) insured versions of these funds.

Why have the fund managers suspended these funds?  

The managers of these funds have decided that the current economic circumstances resulting from the Coronavirus are causing material uncertainty for property valuations. 

Primarily, the independent valuers had a material uncertainty around valuations (due to the current economic circumstances resulting from COVID-19) and were unable to rely on previous market experience to inform their opinion of values of the properties held.  

As such, the various fund managers took the decision to suspend funds to protect the existing investors in the fund(s).

Retirement Account

The following funds suspended on Retirement Account on the dates shown:

Fund ISDN Date suspended
JANUS HENDERSON UK PROPERTY PAIF FEEDER "I" (GBP) ACC GB00BYP82D37 17 March 2020
JANUS HENDERSON UK PROPERTY PAIF FEEDER "I" (GBP) INC GB00BYP82C20 17 March 2020
AVIVA INVESTORS PROPERTY TRUST “SC22 ACC GB00BYYZ0W06 18 March 2020
AVIVA INVESTORS PROPERTY TRUST “SC22 INC GB00BYYZ2464 18 March 2020
BMO PROPERTY GROWTH & INCOME "I" (GBP) ACC  GB00BQWJ8687 18 March 2020
LEGAL & GENERAL UK PROPERTY FEEDER "I" (GBP) INC GB00BK35F390 18 March 2020
LEGAL & GENERAL UK PROPERTY FEEDER "I" (GBP) ACC GB00BK35F408 18 March 2020
STANDARD LIFE INVESTMENTS UK REAL ESTATE INCOME FEEDER "P1" (GBP) INC GB00BYPHPL95 18 March 2020
STANDARD LIFE INVESTMENTS UK REAL ESTATE INCOME FEEDER "P1" (GBP) ACC GB00BYPHPD12 18 March 2020

What is the specific impact on a client’s holding?

For Retirement Account clients they are unable to invest monies, switch into or redeem their holdings.  Any regular income payments will instead be taken proportionately across a client’s other holdings. If they only hold an affected property fund (s) we unfortunately will not be able to make the income payments.

Any regular payments your clients make to their pension will instead be held as cash within their pension product.  We’ve taken this approach because we view cash as less likely to fluctuate in value compared to other asset classes (company shares or bonds for example) and so less likely to negatively impact fund values whilst you and your clients think about any next steps. It is important to note that over the medium to long term the value of cash may be reduced by the impact of inflation.

Insured Funds

For our insured PAC vehicles that own assets in the underlying OEIC funds, the fund managers have also taken the decision to suspend the funds shown in the table below:

Fund name Product
Prudential L&G UK Property Pension Series A Flexible Retirement Plan
Prudential L&G UK Property Life Series 2 Prudential Investment Plan
Prudential L&G UK Property Life Series 4 Flexible Investment Plan – Initial Charge version
Prudential L&G UK Property Life Series 5 Flexible Investment Plan – no Initial Charge version

What is the specific impact on a client’s holding?

For the Prudential L&G UK Property Life and Pension Funds, some transactions are allowed and some are suspended, these are listed below:

Transaction Type Transaction allowed?
Death/critical illness/terminal illness Yes
Retirements (includes full UFLPS) Yes
Partial UFPLS Yes
Maturities Yes
Pension sharing on divorce Yes
Cancellation Rights for Top ups and New Business Yes
Existing Regular Income Drawdown Withdrawals Yes
Existing Regular Withdrawal Bonds Yes
Lifestyle Switches Yes
Charges - Ongoing Adviser Yes
New Investment into products and top ups (including transfers in) No
Customer Initiated Switches In No
Regular Premiums In No, redirect to Cash with No Unit price reduction guarantee
Customer Initiated Switches Out No
Transfers Out Customers aged <55
No
Customers aged 55 and above – Yes, except for those contracts which already offer drawdown (FRP & PCP)
Surrenders No
AD Hoc advisor charge No
Requests to start or increase regular payments No
Regular Premiums Increases (Contractual) Yes, backdate to 18 March 2020
Request to start or restart regular premiums No
Requests to start or increase ongoing adviser charge No
Illustrations Yes
However, they cannot accept new business
Top Up Illustrations Yes
However, they cannot accept new business
Valuations Yes
However, the valuation may not be actionable
Refund of premiums (scheme business) Yes

For more information – please also visit Pru.co.uk page

FREQUENTLY ASKED QUESTIONS:

How long is the suspension likely to last?

We expect the suspensions to remain in place whilst the economic uncertainty affecting the commercial property market continues.  However, for the Retirement Account, the decision to suspend a fund is made by the relevant fund manager.  For insured funds, we will continue to keep the situation under review. 

Why is there a different approach taken for Retirement Account compared to heritage Life & Pension products? 

Unfortunately, transactions are not possible in the OEIC versions of these funds offered via Retirement Account. In certain instances, referred to as “allowable transactions”, we’ve indicated that we’ll allow customers to continue to transact in the insured versions of these funds. 

A different approach can be taken for insured funds, because we effectively own the insured fund assets and are able to use our balance sheet to honour transactions in place of taking ownership of units in the fund once they become tradeable. This approach isn’t possible for OEIC investments. Unlike insured funds, the OEICs are not our (PAC) vehicles.

Are the funds still being priced?

Yes, the funds continue to be priced.

Are the suspended funds held in any of the funds you manage?  If so, which and what is the impact?

L&G UK Property is held in the LF Prudential Risk Managed Active range of funds however, it is a relatively small holding which our Treasury & Investment Office (T&IO) remain comfortable with on a long-term basis. 

What is the latest point at which a trade into the affected funds would be honoured?

For funds held via Retirement Account, trades would be honoured up until 12 noon on the date of suspension, which was 17 March for the Janus Henderson UK Property PAIF Feeder Fund and 18 March for the other impacted funds. 

For insured funds, we’d honour any transactions received in house and fully actionable prior to 12.30pm on 18 March 2020.

How can customers get a fund valuation?

For Retirement Account valuations, customers can call us on 0345 268 0488 or + 44 203 755 9377 if calling from abroad. Lines are open Monday to Friday from 8.30am to 6pm. Calls are charged at local rate.

For Insured funds, customers can call us on 0800 000 000* or (+) 44 1786 448844 if calling from abroad. *Opening times are Monday to Friday 8.30am to 6.30pm. Calls are charged at local rate.

 Will there be any reduction in fees for the period whilst the funds are suspended?

These are funds managed by external managers. The managers of the funds haven’t informed us of any fee reductions for the time being. For Retirement Account customers, any fund fee reduction will automatically be reflected in the fund fees they pay. Should we receive any such notice for the L&G Property Fund, we would also look to pass the reduction on to investors in our insured version of the fund.

Are your writing to impacted customers about the suspensions?

We will be writing to customers.  We’ll also provide advance notice of any communication to the advisers of impacted customers. 

What is the process for any customer who wishes to raise a complaint?

A customer may raise a complaint with any person in our company.  Complaints raised may be referred to our Customer Relations Team. Our Customer Relations Team will arrange for the complaint to be dealt with and they will try to provide a quick and satisfactory conclusion for the customer.

Will you communicate when the fund (s) lift their suspension? 

We’ll post any updates on pru.co.uk and will also inform all financial advisers.  We’ll also write to customers at this time.

We still believe in property as an asset class 

We continue to believe that property can bring important diversification benefits to a portfolio of assets.  Property does however have unique characteristics compared to other asset classes and investors need to be mindful of these when making investment decisions.  In particular, this includes the increased propensity relative to other asset classes for trading in such funds to be suspended, if the manager deems it necessary.

"Prudential" is a trading name of Prudential Distribution Limited. Prudential Distribution Limited is registered in Scotland. Registered Office at Craigforth, Stirling FK9 4UE. Registered number SC212640. Authorised and regulated by the Financial Conduct Authority. Prudential Distribution Limited is part of the same corporate group as the Prudential Assurance Company. The Prudential Assurance Company and Prudential Distribution Limited are direct/indirect subsidiaries of M&G plc, a company incorporated in the United Kingdom. These companies are not affiliated in any manner with Prudential Financial, Inc, a company whose principal place of business is in the United States of America or Prudential plc, an international group incorporated in the United Kingdom.