Gated property funds hit income drawdowns

Many property fund managers have banned savers from withdrawing money.

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.

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.

Recommended

Will Mailbox Reit, a new property fund with a single investment, deliver?
Property

Will Mailbox Reit, a new property fund with a single investment, deliver?

Mailbox Reit, a new real-estate investment trust set to float on a new property exchange, contains just one building. David Stevenson assesses its pro…
20 Oct 2020
Pensions drawdown: don't take too much money out of your pension fund
Pensions

Pensions drawdown: don't take too much money out of your pension fund

New evidence suggests people are depleting their pensions too quickly – and they risk running out of cash in retirement.
14 Oct 2020
Why it pays to take cries of “bubble” with a pinch of salt
Sponsored

Why it pays to take cries of “bubble” with a pinch of salt

Many observers are pointing to a stockmarket “bubble” – especially in US tech stocks. But, says Max King, just because a lot of people are saying it, …
13 Oct 2020
Why the underperforming Temple Bar investment trust will deliver again
Investment trusts

Why the underperforming Temple Bar investment trust will deliver again

Temple Bar, the value-focused investment trust, has had a dreadful year, but new managers should turn it around.
13 Oct 2020

Most Popular

The Bank of England should create a "Bitpound" digital currency and take the world by storm
Bitcoin

The Bank of England should create a "Bitpound" digital currency and take the world by storm

The Bank of England could win the race to create a respectable digital currency if it moves quickly, says Matthew Lynn.
18 Oct 2020
Negative interest rates and the end of free bank accounts
Bank accounts

Negative interest rates and the end of free bank accounts

Negative interest rates are likely to mean the introduction of fees for current accounts and other banking products. But that might make the UK bankin…
19 Oct 2020
What would negative interest rates mean for your money?
UK Economy

What would negative interest rates mean for your money?

There has been much talk of the Bank of England introducing negative interest rates. John Stepek explains why they might do that, and what it would me…
15 Oct 2020