A property fund used by workplace pension schemes has warned investors they could have to wait six months to withdraw their money.
The delay to withdrawals from Prudential’s UK Property Fund came into force on 3 June and was revealed in a statement published on the FTSE 100 company’s website. However, some customers only received notice of the decision this week.
“Any requests to move money out of the fund will be delayed for up to six months from the date we receive your request,” the statement says.
Prudential said exceptions will be made for any customers taking retirement benefits, making claims on death or critical illness, or applying for pension sharing upon divorce.
The fund dates back to 1991 and was worth £660m at the end of May.
Prudential UK head of communications Scott White said: “We have restricted withdrawals from the UK Property Fund for some of our customers to simply enable us to gain a fair price for any property we sell – helping protect the value of the fund for everyone invested in it.”
He added: “Notifications were put in place on member sites at the time and we have been working on formalisation of fairest outcomes for our customers before writing directly to them.”
UK property funds have suffered heavy outflows since autumn last year due to fears surrounding the sector’s health and ongoing Brexit uncertainty. After the referendum in 2016, a number of property funds were forced to block withdrawals.
More recently, regulators have questioned the wisdom behind seemingly-liquid retail funds that are heavily exposed to illiquid assets. A fund run by Neil Woodford, the fallen star of the industry, has been indefinitely suspended following a jump in redemptions. Woodford’s Equity Income Fund holds a number of unquoted securities.
Last week Bank of England governor Mark Carney said these funds were “built on a lie” and warned of a “systemic” threat to the financial sector.
“This is a big deal,” Carney told MPs.
“Something that better aligns the redemption terms with the actual liquidity of the underlying investment is infinitely preferable to the situation that we have today.”