Scottish Widows restricts property fund withdrawals

by Gill Montia

Story link: Scottish Widows restricts property fund withdrawals

Scottish Widows has imposed restrictions on withdrawals from two of its commercial property funds.

The company, which forms part of the Lloyds TSB group, is writing to around 200,000 policyholders to informing them of changes to withdrawals from its £1 billion Life Property fund and £1.1 billion Pension Property fund.

Both will require a 180-day notice period for full or partial redemptions, transfers or switches.

The new restrictions will not apply on death or retirement, or to regular pension payments, critical illness claims and policies that have reached their maturity date.

Existing regular withdrawals are also unaffected and new or increased regular withdrawals can be taken where the proportion of the withdrawal does not exceed the commercial property element of the overall policy.

Scottish Widows says it is taking the action to protect policyholders because of the lenght of time it can take to sell commercial property.

The delay imposed by the restrictions will give the company an opportunity to “implement an orderly programme of sales over a longer period, with the aim of providing liquidity within a reasonable period for those who want to leave the funds”.

The company adds: “At the same time our fund managers will have the opportunity to obtain fair values for properties we sell, protecting the performance of the funds for the majority of policyholders who wish to remain invested.”

The commercial property market is experiencing a significant slowdown brought on by the credit squeeze.

As a result large numbers of investors are withdrawing the profits they have made in earlier years and reducing the short-term liquidity levels of many funds.

In recent weeks Morley, M&G and Scottish Equitable have restricted access by investors to their property funds, in order to prevent a run on their assets.