Prudential UK Property S1 & S3 funds

The UK Property Workplace Pension funds are no longer available for investment.

This page, including the Questions and Answers section, is up to date at 25 October 2021. Please see 'Latest update' section below.

We have now closed the Prudential UK Property S1 and S3 funds (the “property fund(s)”). The dates of the fund switches depends on the fund series (S1 or S3) and the type of pension scheme. The dates were:

  • 24 May 2021 for the S3 fund when accessed via:
    • GPP plans with plan numbers ranging from GPP4000 to GPP4169
    • MPP plans with plan numbers ranging from MPP1001 to MPP1044 and from MPP2001 to MPP2026
  • 9 June 2021 – for the S1 fund, where we had not received an instruction for an alternative fund from the Trustees – where we did receive instruction we actioned at that time
  • 22 June 2021 – for the S3 fund when accessed through plans with numbers other than those noted above **Please also see the ‘Latest update’ section below**

Our letters to customers in April about the closure showed the applicable plan number and closure date.

Latest update

Following the closure of the UK Property S3 fund, we have had a problem with the completion of some switches due to be made on 22 June 2021. We wrote to all affected customers on 16 August to inform them of the problem and the delay to completing their switch. If you were invested in this fund, were due to have your switch made on 22 June 2021 and have not yet received confirmation of your switch, your current fund valuation or fund selection may not reflect the correct position until we fix the problem. We're sorry for any inconvenience or concern this causes you.

We’re working hard to fix the problem and once we have, we'll write to the customers affected to confirm completion of the work. Switches will be backdated to 22 June 2021 even if they were not completed until after this date.

We'll continue to update this page with the progress we're making. If you’re considering making changes to your plan, or you have any concerns, please call us on 0345 600 0343 - we’re happy to help. From abroad you can phone us on (+) 44 1786 448844. We’re open 8.30am to 6pm Monday to Friday (apart from bank holidays).

Background to the closure

Our decision to close these funds was based on our concern over the large number of withdrawal requests from the underlying fund, the M&G PP UK Property fund, creating pressures to sell properties to fund those withdrawals. These pressures were likely to affect the property funds’ performance over the next five years. The number of withdrawals from the underlying fund also meant it would be unlikely that the deferral on the property funds would be lifted soon.

For these reasons we decided these funds were no longer suitable options within our Workplace Pension fund range, and this meant investments could no longer remain in them. We believe this is the best outcome for our customers’ investments, given the outlook for the property funds.

During December 2020 and January 2021 we wrote to scheme trustees, employers and advisers to provide them with advance notice of the closure so they could carry out any due diligence work they need to do on the appropriateness for their members of the alternative fund we proposed.

We also wrote to all our customers who were invested in the property funds with details of the closure, the fund we or their scheme Trustees proposed moving their investment to, and what the next steps would be. The proposed fund was not another property fund.

Throughout the closure process this page has been regularly reviewed and updated.

Background on the deferral of the property funds prior to the closure

From 3 June 2019, some types of withdrawals from the property funds had been deferred. This followed the underlying fund, which the property funds invested in, going into deferral due to liquidity pressures.

After further consideration, from 1 September 2019, and backdated to 3 June, we also decided not to accept new contributions into the property fund and reallocated any regular contributions to the Prudential Cash fund (the “cash fund”). This meant that any regular contributions after 3 June 2019 were not subject to the deferrals that were in place on withdrawals from the property funds.

We wrote to our customers invested in the property funds when the restrictions were introduced, explaining what these meant for them and their investment.

In light of general market conditions in 2020 and unconnected to the deferral, the material uncertainty clause was subsequently applied to the unit prices of the underlying fund. This clause was removed in September 2020.

Questions and Answers

When a fund goes into deferral it does this to protect customers remaining in the fund and to ensure the value of the underlying assets within the fund are managed appropriately. We’ve seen periods in the past where the fund has been deferred for a short period of time and then re-opened once these pressures were alleviated.

On this occasion the deferral was prolonged due to a large number of withdrawal requests in the underlying fund creating more significant pressures, and affecting the performance outlook for the next five years. As the situation developed we considered that the impact of these pressures meant a decision on the longer-term suitability of these funds in our Workplace Pension fund range was required.

Although we decided to close the fund some time before May/June 2021, the impact of the Coronavirus situation and the ongoing deferral impacted our ability to deliver this closure sooner. We aim to implement changes like this in a timely manner, and as such we will make sure customers are no worse off for any delay beyond what we feel is reasonable.

We had concerns over the increase in charges to our customers associated with accessing an alternative property fund. In addition, in our view the cost to a customer of moving their investment from one property fund to another would have been prohibitively high and wouldn’t have represented good value for money.

M&G reopened the M&G Property Portfolio on 10 May 2021. That fund is separate from the underlying fund used by the Prudential UK Property S1 and S3 funds which had faced pressures to sell properties to fund a large number of withdrawal requests.

Those pressures are likely to have affected the performance over the next five years of the property funds. The number of withdrawals from the underlying fund also meant it would be unlikely that the deferral on the property funds would be lifted soon. We therefore decided these funds were no longer suitable options within our Workplace Pension fund range.

Yes, there were other costs. While there is no switch charge for moving investments, there are other costs linked to this type of change. These can be broken down into two types:

  • Out of market risk: When money moves from one asset to another, there may be a short time when the money is not invested, and you wouldn’t benefit from any investment growth during this period ‘out of market’. However, you could benefit by missing any fall in investment values during this time.
  • ·Price adjustment: When we buy or sell units, the fund manager may sometimes adjust the price to protect other investors in the fund. This means you could receive fewer units in the fund your investment is moved to, if that fund’s price is adjusted upwards.

Where we proposed investments be moved to PDGI we estimated that these combined costs could be the equivalent of a one-off amount of approximately 0.5% of your investment in the property fund (£5 of every £1,000 invested). This cost may differ if investments are moved to a different fund. It’s important to note that this cost isn’t an amount that is deducted from your investment but is incorporated in the price we buy and sell units at.

This estimate is based on our current understanding and best analysis but may be subject to change. It will only be known on the applicable closure date, and may be higher or lower than estimated. We’ll provide the actual figures when we write out to our customers with confirmation that their investments have been moved.

We didn’t apply any charges outside of those already mentioned. That means we used all of your investment in the property fund to buy units in the fund(s) that investment was being moved to. We sold the units in the property fund at the market price on the closure date and bought units in the fund(s) the investment was being moved to at the price offered by the fund manager at that time. As different funds have different prices the number of units bought will also be different to the number you held in the property fund.

Yes, it will be applied, even though the contributions won’t be re-invested in the property fund. We’ll take the number of units that you had in the cash fund through reallocated contributions, and check what the value of these units was at the closure date.

When applying the guarantee, if necessary we’ll add units to your plan to make sure that the value of the reallocated contributions is the greater of:

  • the equivalent investment return had you been invested in the Prudential UK Property S1 or S3 fund up until 1 February 2021, which is the date on which we had hoped to complete the closure,
    plus
    the greater of the returns on either the property fund, or the fund(s) investments were moved to, for the period from 1 February 2021 to the applicable property fund closure date (either 24 May, 9 June or 22 June 2021, depending on the plan type noted at the top of the page); or
  • the return from the Prudential Cash S1 or S3 fund; or
  • the contributions paid.

The number of units you had in the cash fund may have been reduced during the reallocation period if any withdrawals were made – this includes any withdrawals to cover Ongoing Adviser Charges or Policy Charges where appropriate. The guarantee will be applied to the unit values after these withdrawals.

This guarantee ended when the property fund closed.

The value of your pension pot depends on the performance of the funds you invest in. Your new fund could perform in a different way to the old fund. No-one knows how funds will perform, so it’s hard to say what this change means for your savings longer term.

Please remember that the value of any investment can go down as well as up so you might get back less than you put in.

Based on what we charge now, PDGI’s annual management charge (AMC) will not be more than that of the property fund. You can find information on PDGI’s further costs and charges in our letter sent to affected customers ahead of the closure. If you selected an alternative fund(s) please bear in mind the AMC of those fund(s) may be higher than that of the property fund.

Please also note that charges might change in the future.

Your fund guide, which sets out all the funds available to you along with the further costs and charges noted in our letter, was updated on or around 22 June with PDGI being added if required and the property fund being removed.

We are sorry if this has caused you issues.  The URL is a mix of lower and upper case characters, and is case sensitive. This means it needs to be typed into your browser exactly as shown in your letter in order to locate the correct fund guide for your plan.

We review, and update where necessary, the ‘Further Costs’ figures on an annual basis. When we sent out our closure letters we were in the midst of updating our fund guides with these revised figures. This meant some fund guides had been revised (those showing a revision date on their back page of “04/2021” or later) while others were still to be updated.

All our fund guides have now been updated with the latest ‘Further Costs’ figures added, PDGI added if it is new to your plan and the property fund removed.

We didn’t accept regular contributions into the property funds while the restriction was in place. Instead, to allow continuity of investment, any regular contributions that would have been invested in the S3 property fund were invested into either the Cash S3 fund or an alternative fund(s) of your choice.

The value of contributions reallocated to the cash fund were to be, with effect from the date noted in the letter to you about the closure, moved to either the fund proposed in that letter or an alternative fund(s) you chose.

Although this action has been taken for the majority of policies, we’re working through a small number of policies that haven’t had contributions switched yet. We’ll still apply the same effective date to these contributions. You may still see this reflected on your policy, however we expect to complete this in the coming weeks - when we do, we’ll update this page.

The cash fund has the lowest level of risk of any of the alternative funds available, and is defined as the default fund to be used under a fund restriction scenario. Additionally, we applied the guarantee noted in question 5 to ensure no-one suffered any financial detriment as a result of reallocating their regular contributions to cash.

The guarantee noted above in question 5 ensured no-one suffered any financial detriment as the result of reallocating their regular contributions to cash.

No – the reallocation of contributions was to protect regular contributions made since 3 June 2019. The restriction on the property funds, and not allowing switches out at that time, was to protect the long-term interests of investors in the funds.

All requests were processed either at the end of their six month deferral period or with effect from the applicable closure date, whichever was sooner. We wrote to customers beforehand to check that they still wished to proceed with the request.

We announced a deferral on some types of withdrawals from the Workplace Pensions Prudential UK Property S1 & S3 funds. We also decided to stop accepting new contributions into the funds.

This was done as the manager of the underlying fund, the M&G PP UK Property fund, needed to sell some of the property the fund owned, so that payments could be made to customers. Occasionally we, along with the fund manager, put withdrawal requests on hold for our property funds which enables the manager to get the best price it can for property it is selling within the underlying fund.

This is a normal part of how a property fund works, and doing this helped the manager protect the value of the fund for everyone invested in it.

The general market conditions since that announcement, especially in 2020 due to the Coronavirus pandemic, meant the fund manager was unable to sell sufficient properties to enable the underlying fund to come out of deferral. Those conditions improved and the fund manager was able to restart their planned sales of properties.

However, the deferral remained in place until the closure.

Please call 0345 600 0343 to request one.

The unit prices of funds are published on our website.

The unit prices for the Prudential UK Property S1 and S3 funds were linked to the value of the property assets of the underlying fund, the M&G PP UK Property fund (which in earlier updates to this page we referred to by another name we use internally, the “PPL Property fund”). Due to the ongoing Coronavirus situation, independent valuers in the market had found it increasingly difficult to accurately value properties held by commercial property funds. As a result a material uncertainty clause was invoked.

The general lack of market activity meant there were few similar properties with which to compare valuations. There were also issues with assessing how secure rental income from tenants may be, both now and in the future. These issues can create uncertainty in the overall fund valuation and therefore also affect fund prices.

As previously advised, the clause was lifted in September 2020.