Thousands stuck in property funds as Standard halts exits

Investors wishing to remove their money may have to wait six months

Standard Life became the latest insurer to close the doors of its commercial property funds to immediate withdrawals yesterday, forcing more than 200,000 investors to wait as long as six months to get their hands on their money.

The Scottish insurer implemented the emergency measures yesterday morning after liquidity in six of its life and pension property funds fell to very low levels. As a result, investors who want to remove their money from Standard Life's property funds – which have assets totalling just under £2.7bn – will be placed in a queue, and told they may have to wait as long as six months for the transaction to be processed.

The move comes less than a week after Norwich Union imposed similar measures on one of its largest property funds, trapping a similar number of investors into its funds. The two closures in quick succession may indicate the start of a new rash of temporary fund closures, as conditions in the com-mercial property market continue to deteriorate. A number of commercial property funds – including those managed by Friends Provident, Aegon and Scottish Widows – were temporarily closed to withdrawals at the start of last year, and towards the end of 2007. In the case of Aegon, customers were told they may have to wait as long as a year to redeem their investments.

However, Friends, Aegon and Scottish Widows have all since ended the restrictions, having restored the necessary liquidity to their funds.

Standard Life said yesterday that it had been carefully managing liquidity in its fund over the past year to try to avoid the need to put a halt on instant withdrawals. However, it said it had now reached the stage where it needed to act, to protect investors who wished to stay in its property funds.

The commercial property market continued to deteriorate in 2008, as many more businesses closed down or scaled back their operations. As a result, fund managers have found it hard to sell properties in their portfolios for a fair price, and have imposed the restrictions on withdrawals to protect them from being forced to dispose of some of their holdings at knockdown prices.

"Our decision to introduce a queuing system on some of our property funds is designed to ensure fairness," said John Gill, the managing director of customer services at Standard Life. "The continued deterioration of the UK commercial property market means we have to introduce some controls over the programme of sales of properties from within certain funds.

"Whilst this is an established method of dealing with such a situation, we also appreciate it is an unwelcome one for some investors. However, failure to act now would increase the risk of us not being able to achieve the best deal for all investors in the fund, including those who intend to remain invested over the long term. Despite the existing difficulties for commercial property, we firmly believe that our property funds are well positioned for recovery over the medium to long term."

The closing to withdrawals of another property fund is yet another piece of bad news for investors, who have already seen the value of their investments plummet over the past couple of years. According to Trustnet.com, the fund research website, the average commercial property fund has lost almost a third of its value over the past year, with the worst funds more than halving in value.

The news completes a bad month for Standard Life investors. A few days ago, it was revealed that one of Standard Life's cash funds – which are meant to be a safe haven for investors' money – had lost around 5 per cent of its value, after some of the portfolio had been invested in toxic mortgage securities.

Meanwhile, Standard Life also announced a series of cuts to the bonus rates in its with-profits funds yesterday, following the volatile market conditions which prevailed throughout 2008. The insurer's with-profits bonds fell by as much as 13.9 per cent over the year, while its mortgage endowment policies lost around 4.5 per cent of their value. However, Tom McPhail, the head of pensions research at Hargreaves Lansdown, the Bristol-based financial advisers, said that the results for Standard Life policyholders were not nearly as bad as the cuts announced by Friends Provident and Norwich Union over the past few weeks. Nevertheless, he questioned whether with-profits funds were the right product for most investors today, advising customers to review their investment choices. He added that Standard Life's market value reductions – penalties for cashing in with-profits products – are lower than most of its rivals, meaning it may not be too costly to cash in an endowment or with-profits bond and reinvest the money elsewhere.

Standard Life insisted that with-profits were still providing some protection from the worst effects of the recent significant stock market falls.

Sport
world cup 2014A history of the third-place play-offs
News
Tommy Ramone performing at The Old Waldorf Nightclub in 1978 in San Francisco, California.
peopleDrummer Tommy was last surviving member of seminal band
Life and Style
Swimsuit, £245, by Agent Provocateur
fashion

Diving in at the deep end is no excuse for shirking the style stakes

Sport
The Mexico chief finally lets rip as his emotions get the better of him
world cup 2014
PROMOTED VIDEO
Voices
Spectators photograph the Tour de France riders as they make their way through the Yorkshire countryside
voicesHoward Jacobson: Line the streets for a cycling race? You might just as well watch a swarm of wasps
Life and Style
lifeHere's one answer to an inquisitive Reddit user's question
Life and Style
Several male celebrities have confessed to being on a diet, including, from left to right, Hugh Grant, Benedict Cumberbatch and Ryan Reynolds
...and the weight loss industry is rubbing its hands in glee
News
peopleDave Legeno, the actor who played werewolf Fenrir Greyback in the Harry Potter films, has died
Sport
Mario Balotelli, Divock Origi, Loic Remy, Wilfried Bony and Karim Benzema
transfersBony, Benzema and the other transfer targets
Sport
Yaya Touré has defended his posturing over his future at Manchester City
News
Detail of the dress made entirely of loom bands
news
News
ebookA unique anthology of reporting and analysis of a crucial period of history
Life and Style
beauty
Sport
There were mass celebrations across Argentina as the country's national team reached their first World Cup final for 24 years
transfersOne of the men to suffer cardiac arrest was 16 years old
Arts and Entertainment
Armando Iannucci, the creator of 'The Thick of It' says he has
tvArmando Iannucci to concentrate on US show Veep
News
A mugshot of Ian Watkins released by South Wales Police following his guilty pleas
peopleBandmates open up about abuse
Sport
Basketball superstar LeBron James gets into his stride for the Cleveland Cavaliers
sportNBA superstar announces decision to return to Cleveland Cavaliers
Have you tried new the Independent Digital Edition apps?
Independent Dating
and  

By clicking 'Search' you
are agreeing to our
Terms of Use.

iJobs Job Widget
iJobs Money & Business

Information Security Manager (ISO 27001, Accreditation, ITIL)

£70000 per annum: Harrington Starr: Information Security Manager (ISO 27001, A...

Biztalk - outstanding opportunity

£75000 - £85000 per annum + ex bens: Deerfoot IT Resources Limited: Biztalk Te...

Trade Desk Specialist (FIX, Linux, Windows, Network Security)

£60000 per annum: Harrington Starr: Trade Desk Specialist (FIX, Linux, Windows...

Service Desk Analyst (Windows, Active Directory, ITIL, Reuter)

£35000 per annum: Harrington Starr: Service Desk Analyst (Windows, Active Dire...

Day In a Page

A History of the First World War in 100 Moments: Peace without magnanimity - the summit in a railway siding that ended the fighting

A History of the First World War in 100 Moments

Peace without magnanimity - the summit in a railway siding that ended the fighting
Scottish independence: How the Commonwealth Games could swing the vote

Scottish independence: How the Commonwealth Games could swing the vote

In the final part of our series, Chris Green arrives in Glasgow - a host city struggling to keep the politics out of its celebration of sport
Out in the cold: A writer spends a night on the streets and hears the stories of the homeless

A writer spends a night on the streets

Rough sleepers - the homeless, the destitute and the drunk - exist in every city. Will Nicoll meets those whose luck has run out
Striking new stations, high-speed links and (whisper it) better services - the UK's railways are entering a new golden age

UK's railways are entering a new golden age

New stations are opening across the country and our railways appear to be entering an era not seen in Britain since the early 1950s
Conchita Wurst becomes a 'bride' on the Paris catwalk - and proves there is life after Eurovision

Conchita becomes a 'bride' on Paris catwalk

Alexander Fury salutes the Eurovision Song Contest winner's latest triumph
Pétanque World Championship in Marseilles hit by

Pétanque 'world cup' hit by death threats

This year's most acrimonious sporting event took place in France, not Brazil. How did pétanque get so passionate?
Whelks are healthy, versatile and sustainable - so why did we stop eating them in the UK?

Why did we stop eating whelks?

Whelks were the Victorian equivalent of the donor kebab and our stocks are abundant. So why do we now export them all to the Far East?
10 best women's sunglasses

In the shade: 10 best women's sunglasses

From luxury bespoke eyewear to fun festival sunnies, we round up the shades to be seen in this summer
Germany vs Argentina World Cup 2014: Lionel Messi? Javier Mascherano is key for Argentina...

World Cup final: Messi? Mascherano is key for Argentina...

No 10 is always centre of attention but Barça team-mate is just as crucial to finalists’ hopes
Siobhan-Marie O’Connor: Swimmer knows she needs Glasgow joy on road to Rio

Siobhan-Marie O’Connor: Swimmer needs Glasgow joy on road to Rio

18-year-old says this month’s Commonwealth Games are a key staging post in her career before time slips away
The true Gaza back-story that the Israelis aren’t telling this week

The true Gaza back-story that the Israelis aren’t telling this week

A future Palestine state will have no borders and be an enclave within Israel, surrounded on all sides by Israeli-held territory, says Robert Fisk
A History of the First World War in 100 Moments: The German people demand an end to the fighting

A History of the First World War in 100 Moments

The German people demand an end to the fighting
New play by Oscar Wilde's grandson reveals what the Irish wit said at his trials

New play reveals what Oscar Wilde said at trials

For a century, what Wilde actually said at his trials was a mystery. But the recent discovery of shorthand notes changed that. Now his grandson Merlin Holland has turned them into a play
Can scientists save the world's sea life from

Can scientists save our sea life?

By the end of the century, the only living things left in our oceans could be plankton and jellyfish. Alex Renton meets the scientists who are trying to turn the tide
Richard III, Trafalgar Studios, review: Martin Freeman gives highly intelligent performance

Richard III review

Martin Freeman’s psychotic monarch is big on mockery but wanting in malice