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Suspended property funds

Following the developments in the UK property sector we have seen announcements from Standard Life Investments, Aviva, M&G, Henderson and  Columbia Threadneedle confirming that they have suspended dealing in their UK property funds.

With these announcements in mind there may be questions from investors regarding the impact on their policies, specifically relating to valuations, switches and other transactions.

Below is a list of questions and answers which set out how we are handling the most common transactions during this period of suspension.

Click on the links below to navigate to the relevant information.

Funds currently affected   

The details below relate to the following products with Old Mutual Wealth:

  • Old Mutual Wealth Limited
  • Old Mutual Wealth Life & Pensions Limited
  • Old Mutual International (Guernsey) Limited

Fund Name

ISIN

SEDOL

Date of suspension

There are currently no funds suspended.      

The details below relate to products held with Old Mutual Wealth Life Assurance Limited:

  • Old Mutual Wealth Life Assurance Limited
  • Professional Life Assurance Company Limited

Fund Name

Date of suspension

There are currently no funds suspended.  

How transactions are affected   

The details below relate to the following products with Old Mutual Wealth:

  • Individual Savings Account (ISA)
  • Collective Investment Account (CIA)
  • Collective Retirement Account (CRA)
  • Collective Investment Bond (CIB)
  • Offshore Collective Investment Bond (OCIB)

Transaction

How it is affected

Valuations

The fund managers will still price the funds each day, and the value of units in suspended funds will be included in the overall value of investments.

Switch specific funds

Switching to or from suspended funds is not possible. 
Other funds can be switched.

Automatic rebalancing and phased investment

These arrangements will have been cancelled and cannot be restarted until the suspensions are lifted. We will require a new instruction to restart. 

Redirections
(changing funds for future direct debit payments)

A different fund choice can be chosen for future direct debits provided the new instruction does not include a suspended fund.

Realignment switch

A realignment switch is possible, whereby funds in an account/bond are completely restructured but suspended funds will be excluded from the transaction. The system will adjust the percentage split of funds accordingly.

Pre-defined Portfolio (PDP)

Suspended funds will need to be removed from PDPs before they can be used. If your PDP includes a suspended fund, you can change the funds in that PDP (removing any suspended funds) or create a new PDP, then switch into the amended/new PDP. The suspended funds already held will not be touched and will remain in the investment.

Direct debits

Any part of a direct debit payment that is currently allocated to the suspended funds will be allocated to a cash holding, while the fund is suspended.
The type of cash holding will depend on the investment:

  • Cash Deposit – CIA and ISA
  • The BlackRock Cash fund – CRA.

We will not automatically switch the cash holding into the suspended fund once the suspension is lifted.

The cash holding may not be suitable for clients’ long-term investment needs. If they want to switch away from it and redirect to an alternative fund(s), they will need to provide us with new instructions.

We have advised clients that it is important to speak to their financial advisers before making any investment decisions.

Distributions

Any distributions we receive in respect of suspended funds will be added to the largest unsuspended fund in the investment.
ISA/CIA – if the income payment option applies, any distributions we receive for suspended funds will still be included in income payments.

Withdrawals (non CRA)

Provided there are other funds in the account and they are of sufficient value, we will raise the withdrawal amounts by selling units from those funds instead. If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Withdrawals (CRA) – including tax-free cash payments

Tax-free cash (usually 25%) will be paid from unsuspended funds in the account because we are unable to crystallise and pay tax-free cash on suspended funds.

For example, on an account worth £100,000 with £10,000 invested in a suspended fund:  

  • We would be able to crystallise £90,000, with tax-free cash of £22,500.
  • When the fund becomes unsuspended we can accept a new request to crystallise the remaining funds and pay tax-free cash.

If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Payment of protected tax-free cash entitlement

Where a client’s tax-free cash entitlement exceeds 25% of the fund value, we will pay the maximum entitlement from unsuspended funds, using a priced valuation of the suspended fund within the calculation.

If there is insufficient value in the unsuspended funds to make such a payment the client will have two choices:

  • They can have the maximum tax-free cash available based on the unsuspended fund value, although that will not necessarily be the HMRC maximum entitlement. The suspended fund holding will make up the crystallised holding within the account but no income withdrawals will be available until the suspension is lifted.
  • They can cancel the instruction to crystallise benefits and wait until the suspensions are lifted.

Regular automatic withdrawals
(non CRA)

Provided there are other funds in the account and they are of sufficient value, these will be unaffected because we will raise the withdrawal amounts by selling units from those funds instead. If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Tax-efficient Regular Income Option (TRIO) (CRA)

Provided there are other funds in the account and they are of sufficient value, these will be unaffected because we will raise the withdrawal amounts, including the tax-free cash, by selling units from those funds instead. If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Income payments (CRA)

Provided there are other funds in the account and they are of sufficient value, these will be unaffected because we will raise the withdrawal amounts by selling units from those funds instead. If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Pension transfers to another provider (CRA)

Transferring an UNCRYSTALLISED account to another provider where tax-free cash is limited to 25% of the fund
This is possible if the new provider can accept the transfer in multiple instalments. The first instalment will include the value of all units apart from the suspended funds. We will send the value of the suspended fund units to the new provider once the suspension is lifted.

Transferring an UNCRYSTALLISED account to another provider where tax-free cash exceeds 25% of the fund

It is not possible to transfer a pension value of this type to another provider until the fund suspension is lifted if the client’s higher tax-free cash entitlement is to be protected as part of a block transfer.

Transferring a CRYSTALLISED account to another provider
It is not possible to transfer a crystallised pension to another provider until the fund suspension is lifted as HMRC rules will not allow us to split crystallised arrangements.

Transfers (ISA/CIA)

It will depend whether the transfer is by re-registration or cash.
Re-registration
Suspended funds can be re-registered to another provider, but as the fund suspensions apply across the industry, the new provider will not be able to sell them until the suspension is lifted.
Cash transfers
CIA – We can transfer the cash proceeds from all other funds held in the account, but we will not be able to send the proceeds from the suspended funds until the suspension is lifted.
ISA - It is not possible to complete a cash transfer, because we will not be able to sell the suspended funds and we cannot carry out partial transfers.

New investments/top-ups

It is not possible to invest in suspended funds; if we receive an instruction including a suspended fund we will ask for a revised fund choice. 

Adviser servicing fees

These will be unaffected because we will raise the fee payments by selling units from the other funds held in the investment.

Rebates

Any rebates we receive in respect of suspended funds will be added to the largest unsuspended fund in the investment.

Closing accounts/bonds

This is possible, but we can only sell other funds in the investment, not the suspended funds. 

ISA/CIA - We will send the proceeds from the sale of other funds in the account within our normal time scales. Once the suspension is lifted, we will sell the remaining funds and send the proceeds to complete the closure.

CIB/OCIB - We will send the proceeds from the sale of other funds in the bond within our normal time scales, and issue the appropriate Chargeable Event Certificate including the value of the suspended fund(s) as at the date the other funds were sold, as though it had also been sold. We will send the money from the suspended fund(s) and reissue the Chargeable Event Certificate once the suspension has been lifted.

 

How transactions are affected - Heritage 

Whilst the funds are suspended, they have been ring-fenced and on Tuesday 8 August we have temporarily removed them from display if your clients hold any of these funds until the suspension has lifted. However, rest assured these funds still form an integral part of your clients policy and once the suspension is lifted, the valuations will reflect their holding in these funds again.

The details below relate to products held with Old Mutual Wealth Life Assurance Limited:   

Transaction

How it is affected

Valuations

During the fund suspension period, any annual review statements, annual benefit statements or online valuations will NOT INCLUDE the value of the suspended fund(s).  They will only include the value of any other funds held.
Therefore, please note that any policy valuations received while the fund is suspended may appear lower than otherwise expected.  We can, if required, provide an indicative valuation of the investment in the suspended fund(s) using the latest price available from the fund manager. If you would like to make use of this service, please call us.

Switch specific funds

Switching to or from suspended funds is not possible. 
Other funds can be switched.

Switch ALL funds

It is not possible to restructure your entire portfolio because this would entail switching from a suspended fund, which we are unable to do.

Pre-defined Portfolios (PDPs)

If your PDP includes a suspended fund, you will be unable to switch to/from the PDP.

Rebalancing & phased investment

These arrangements will have been cancelled and cannot be restarted until the suspensions are lifted. We will require a new instruction to restart. 

Redirections
(changing funds for future direct debit payments)

A different fund choice can be chosen for future direct debits provided the new instruction does not include a suspended fund.

Direct debits and regular payments

Any part of a direct debit payment that is currently allocated to the suspended funds will be allocated to the OMW Deposit fund.
We will not automatically switch from the OMW Deposit fund into the suspended fund once the suspension is lifted.

This fund may not be suitable for clients’ long-term investment needs. If they want to switch away from it and redirect to an alternative fund(s), they will need to provide us with new instructions.
We have advised clients that it is important to speak to their financial advisers before making any investment decisions.

Withdrawals/Encashments
(Non-Pensions)

Provided there are other funds in the account and they are of sufficient value, we will raise the withdrawal amounts required by selling units from across all of those funds instead. We are unable to sell from specific funds. If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Encashments from Pension Plans

Applications to encash the uncrystallised value of your plan will only be allowed if the full value of units in funds that are not currently suspended can be transferred to another registered pension scheme (See Can I transfer my pension to another provider)
Requests for the following will only be available once the suspension has been lifted on all funds in your plan:

  • A taxable lump sum payment.
  • Purchase of a Lifetime Annuity through use of the Open Market Option available on your plan.
  • Payment of a tax-free cash sum that exceeds 25% of the current plan value.

Pension withdrawals

Provided there are other funds in the account and they are of sufficient value, we will raise the withdrawal amounts by selling units from those funds instead. If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Regular withdrawals

Provided there are other funds in the account and they are of sufficient value, we will raise the withdrawal amounts by selling units from those funds instead. If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Income payments

Provided there are other funds in the account and they are of sufficient value, we will raise the withdrawal amounts by selling units from those funds instead. If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Pension transfers to another provider

Transferring an UNCRYSTALLISED plan to another provider where tax-free cash is limited to 25% of the fund

This is possible if the new provider can accept the transfer in multiple instalments. The first instalment will include the value of all units apart from the suspended funds. We will send the value of the suspended fund units to the new provider once the suspension is lifted.

Transferring an UNCRYSTALLISED account to another provider where tax-free cash exceeds 25% of the fund

It is not possible to transfer a pension value of this type to another provider until the fund suspension is lifted if the client’s higher tax-free cash entitlement is to be protected as part of a block transfer.


Transferring a CRYSTALLISED plan to another provider
It is not possible to transfer a crystallised pension to another provider until the fund suspension is lifted as HMRC rules will not allow us to split crystallised arrangements.

If it looks like there won’t be enough value in those funds to pay the next two income payments, we’ll contact you and your client to discuss options, such as changing income amounts.

Investing more money

It is not possible to invest in suspended funds; if we receive an instruction including a suspended fund we will ask for a revised fund choice. 

Fund-based and servicing fees

Where you have agreed that fees are deducted from your plan and paid to your financial adviser, we will continue to make fee payments in respect of your other fund(s).
However, payments relating to the suspended funds will not be made until the fund suspension is lifted, and will be based on the price prevailing at that time.

Closing a bond

This is possible, but we can only sell other funds in the bond, not the suspended funds. 
We will send the proceeds from the sale of other funds in the bond within our normal time scales, and issue the appropriate Chargeable Event Certificate including the value of the suspended fund(s) as at the date the other funds were sold, as though it had also been sold. We will send the money from the suspended fund(s) and reissue the Chargeable Event Certificate once the suspension has been lifted.


Client letters  

Financial Adviser Verification