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

Properties for sale for around £1m
Houses for sale

Properties for sale for around £1m

From a two-bedroom garden flat in Notting Hill, London, to a Grade II-listed medieval hall house in Dorking and a 17th century farmhouse in Nottingham…
22 Jan 2021
Lockdown hammers commercial landlord Hammerson
Property

Lockdown hammers commercial landlord Hammerson

Three quarters of the tenants of shopping-centre operator Hammerson have been forced to close during the lockdown.
21 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021
Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021

Most Popular

Why we won’t see a house-price crash in 2021
House prices

Why we won’t see a house-price crash in 2021

Lockdown sent house prices berserk as cooped up home-workers fled for bigger properties in the country. And while they won’t rise quite as much this y…
18 Jan 2021
Inflation is the easiest way out of this – just don’t expect politicians to admit it
Inflation

Inflation is the easiest way out of this – just don’t expect politicians to admit it

The UK government borrowed £34.1bn in December, a record amount for that month. Britain's debt pile now amounts to 100% of GDP. How are we going to pa…
22 Jan 2021
The best investment trusts to buy for 2021
Investment trusts

The best investment trusts to buy for 2021

Sectors ranging from emerging markets to student accommodation look poised to do well this year, says David Stevenson, as he picks the best investment…
19 Jan 2021