Prudential has applied restrictions to its Workplace Pension UK Property Fund from 3 June 2019. This means we may be heading back to the summer of 2016 when the Brexit Referendum took place, where suspensions on withdrawals from UK Property funds were widespread amid worries that commercial property demand may fall..
Clients invested in this Prudential fund may be restricted by up to 6 months when withdrawing funds, taking retirement benefits, critical illness claims, pension sharing on divorce and death claims, whilst they monitor the fund closely to increase liquidity.
Prudential has written to all clients invested in the fund to confirm the restrictions could be in place for up to 6 months. Prudential states that occasionally fund managers do put a hold on this type of fund so that the best price for properties can be secured when selling with the aim of protecting the value of the fund in the best interest of its investors. Prudential will write again to advise all clients when the hold has been lifted.
Open ended UK Property funds where warned this year last year by many commentators that property funds would be under pressure from the uncertainty with Brexit. Quite simply, if the economy slows down or moves into recession, demand for commercial property falls result in ‘voids’ i.e. empty property with little or no rental income or slow sales or reduced property price/fund valuations.
Hence our headline warning: No Deal Brexit Could Suspend Property Funds Again.
The Investment Association already has a working group looking at guidelines and new rules for fund managers to allow retail and professional investors to withdraw funds either monthly or quarterly during difficult liquidity periods.