Friends Provident has today imposed a notice period for its £1.2bn property funds, during which policyholders will have their withdrawals and switches deferred for up to six months from the date of request.
The company says it has made the decision due to a sharp fall in investor demand for UK commercial property, brought about by the credit crunch.
Friends Provident says it will continue to honour existing automatic lifestyle switches and regular withdrawals from investment bond products. It will also pay out for death claims, critical illness claims, maturities, retirement and in divorce cases.
The notice period will apply for surrenders, part surrenders, regular withdrawals, switches or transfers.
The firm has experienced many sustained withdrawals from the fund as investors begin to fear that commercial property may make low returns or even losses in the coming year. The firm says it has made the decision because it will now need to sell underlying property investments in order to meet payment obligations to policyholders.
Friends Provident says this is the right decision to make, as property can take many months to sell, particularly if seeking to achieve the best terms for investors. Quick sales would result in properties being sold for below market value and ultimately harm all investors in the funds.
The notice period only applies to Friends Provident’s internally managed property funds and does not affect any other funds.
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