Prudential UK Property Fund restrictions - November 2020

This page was last reviewed in November 2020. No material changes have been made to the previous version (October 2020).

From 3 June 2019, some types of withdrawals from the Workplace Pensions Prudential UK Property Fund (S1 & S3) (the “property fund”) have been deferred. This followed the M&G PP UK Property Fund, (the “underlying fund”) which the property fund invests 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 fund at the moment and are redirecting any regular contributions to the Prudential Cash Fund (the “cash fund”).

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

In light of general market conditions earlier this year and unconnected to the deferral, the material uncertainty clause was subsequently applied to the unit prices of the underlying fund. We have previously advised that this clause has now been removed.

However, the property fund still remains in deferral. This will remain the case until the deferral on the underlying fund is lifted. We continue to monitor the situation closely and will write to all affected customers when this changes.

What this means for your investment

If you are invested in the property fund, your money will stay invested there. But you won’t be able to make any new payments into the fund until we’ve ended the restrictions. In addition, any request to switch out of the fund will be deferred for up to six months from the date we receive that request. ‘Switches out’ include those due to surrender and claims at a scheme level.

However, there are also certain withdrawals out of the fund which continue to be allowable at this time. These are:

  • Taking retirement benefits, including contractual regular withdrawals and income payments
  • Any claims on death or serious ill-health
  • Pension sharing on divorce.

Instead of being paid into the property fund, any regular contributions are being redirected into either the cash fund or an alternative fund(s) if you’ve chosen one.

This means that any regular contributions customers made after 3 June 2019 are not subject to the deferrals currently in place on withdrawals from the property fund.

Other funds in your plan aren’t affected – you can continue to make payments into those funds and switch between them.

The material uncertainty clause no longer applies to the fund’s prices

The clause was applied as the ongoing Coronavirus situation made it difficult to accurately value properties held by the fund.

As previously advised, the clause no longer applies. However, liquidity pressures on the underlying fund remain and we cannot say at this time when the deferral on the fund will be lifted.

You can read more about the clause, and the continuing restrictions, in the questions and answers section below.

If you are 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).

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

This was done as the manager of the underlying fund, the M&G PP UK Property fund, needs to sell some of the property the fund owns, so that payments can be made to customers. Occasionally we put withdrawal requests on hold for this type of fund which enables us to get the best price we can for property we are selling within it.

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

The general market conditions since our announcement, especially earlier this year due to the Coronavirus pandemic, have meant the fund manager has been unable to sell sufficient properties to enable the underlying fund to come out of deferral. Now that those conditions have improved we expect that the fund manager will be able to restart their planned sales of properties.

However, until those sales have been made the deferral will remain in place, for both the underlying and the property funds. We will update this page and write out to affected customers when this changes.

The Prudential UK Property Fund

Yes, there are certain transactions which continue to be allowable at this time. These are:

  • Taking retirement benefits, including contractual regular withdrawals and income payments
  • Any claims on death, or serious ill-health
  • Pension sharing on divorce

For more detail, please contact us on 0345 600 0343.

We don’t yet know how long the fund will remain restricted for, but we’ll monitor the situation closely. We’ll publish more information on this page when we have it, or if the situation changes.

No, other funds are not impacted by these current restrictions.

At this time we cannot accept any new investments into the property fund. We will provide an update on this page when this changes.

No. We’ve decided not to accept new investments into the fund at the moment. This includes where that investment is being switched out of another fund. We’ll write to customers in the fund once we’ve removed these restrictions, or if anything changes before then. We’ll also update this page, as and when changes happen.

Since 1 September 2019 (backdated to 3 June 2019) we have redirected regular contributions into either the cash fund or an alternative fund(s) if you’ve chosen one.

We’ve written to customers affected by this to explain their options.

Generally, you cannot switch immediately out of the property fund while the restriction is in place, but you can switch out subject to a deferral period of up to six months. You can send us a completed request form and we will contact you closer to the end of the six-month deferral period (or sooner, if the restriction is lifted before then) to explain your options and to check whether you still want to proceed. 

However, there are still some transactions which are allowed at the current time:

  • Taking retirement benefits, including contractual regular withdrawals and income payments
  • Any claims on death, or serious ill-health
  • Pension sharing on divorce.

For further details please contact us.

We can also process withdrawals from any other fund holdings where transactions are not suspended, subject to individual policy rules.

Yes, please call 0345 600 0343 to request one. Please bear in mind that certain transactions are subject to a deferral period of up to six months. If, at the end of that period, the transaction was still wanted it would use a fund valuation based on the unit prices current at that point in time.

The unit price of the fund continues to be published on our website.

We will post any updates on this page and we’ll also write to customers invested in the Prudential UK Property Fund.

We are not accepting regular contributions into the property fund while the restriction remains in place. Instead, to allow continuity of investment, any regular contributions that would have been invested in the property fund will now be invested into either the cash fund or an alternative fund(s) of your choice during the restriction period.

We will continue to redirect regular contributions until the property fund is unrestricted, at which point we will look to invest those contributions invested in the cash fund from 3 June 2019 onwards back into the property fund. Any regular contributions made into an alternative fund(s) will not be moved and will instead remain invested there.

At the end of the restrictions we’ll make sure that the value of regular contributions we redirected into the cash fund will be the greater of:

  • equivalent investment return had you been invested in the Prudential UK Property Fund; or
  • the return from the Prudential Cash Fund; or
  • the contributions paid.

Please note, the guarantee only applies to contributions we redirect into the cash fund. If you decide to switch this money out of the cash fund, the guarantee will still apply for the period it was invested in the cash fund.

Contributions received before 3 June 2019, invested in the property fund, will remain in that fund.

You can choose to allocate these regular contributions to alternative funds if you wish but those will not automatically be switched back into the property fund.

The cash fund is being used at it is the most suitable alternative and is defined as the default fund to be used under a fund restriction scenario. 

You are free to choose an alternative fund into which future regular contributions are paid into, if you so wish.

At the end of the restrictions we’ll make sure that the value of regular contributions we redirect into the cash fund will be the greater of:

  • the equivalent investment return had you been invested in the Prudential UK Property Fund; or
  • the return from the Prudential Cash Fund; or
  • the contributions paid.

No – the reallocation of contributions is to protect future contributions. The restriction on the property fund, and not allowing switches out at this time, is to protect the long-term interests of investors in the fund.

No - if you would prefer to choose an alternative fund while the property fund is suspended, then you can. We do need you to send us a fund reallocation instruction to allow us to process this request. If you do so your reallocated contributions will not automatically be switched back to property when the restriction is lifted.

Once the restriction is lifted, we will switch your resulting cash fund investment back into the property fund (free of any switch charge) and you will receive confirmation of the switch transaction when complete. If you have chosen another fund in the meantime, you will not automatically be switched to property and will remain in the fund you have chosen.

If you continue to pay contributions into the cash fund and want to either remain there, or move them to a fund or funds other than the property fund, we will tell you about this process when we write to you again when the restriction is lifted.

We’ll take the number of units that you have in the cash fund through reallocated contributions and check what the value of these units is at the point the restriction is lifted.

We’ll make sure that the value of those will be the greater of:

  • the equivalent investment return had you been invested in the Prudential UK Property Fund; or
  • the return from the Prudential Cash Fund; or
  • the contributions paid.

We will send you a statement showing any resulting transaction and the switch back to property on the lifting of the restriction. The number of units that you have in the cash fund may be reduced accordingly during the restriction period if any withdrawals are made – this includes any withdrawals to cover Ongoing Adviser Charges or Policy Charges where appropriate.

The unit price for your Prudential property fund is 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’ve 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 no longer applies. However, liquidity pressures on the underlying fund remain and we cannot say at this time when the deferral on the fund will be lifted.