Gated property funds hit income drawdowns

Savers withdrawing retirement income directly from their pension funds via income drawdown plans could face difficulties accessing cash if they have investments in commercial property funds, according to financial advisers.

Several fund managers have “gated” their property funds in recent weeks, banning savers from withdrawing money from the funds. The moves follow uncertainty about what the underlying property in the vehicles is worth amid the volatility caused by the Covid-19 pandemic.

With many income drawdown pension savers investing in property funds as a core holding, the restrictions mean a key part of their portfolio will temporarily be unavailable as a source of regular income.

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Even worse, some drawdown plans are set up in such a way as to make all withdrawals impossible if any part of the portfolio is suffering such restrictions. As a result, savers could find themselves unable to draw down any pension income at all, even if they hold only a small proportion of their portfolio in a gated property fund.

Royal London, one drawdown provider that operates in this way, has now introduced new procedures to prevent savers being left with no income.

However, financial advisers are pressing other providers to follow suit amid fears some savers could be left with no income at all until property fund restrictions are lifted.