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THE SW HENDERSON UK PROPERTY FUNDS - SUSPENSION LIFTED

We lifted the suspension to our SW Henderson UK Property life and pensions funds at 12 noon on 14th October 2016, allowing customers to resume buying and selling units in the SW Henderson UK Property Funds.

Buying and selling of units in the Henderson UK Property Fund was suspended on 5th July 2016. The SW Henderson UK Property life and pensions funds invest directly into the Henderson UK Property Fund and were also suspended on 5th July 2016. As they indicated in late September, Henderson has now lifted its fund suspension, which has duly allowed us to lift the suspension on the SW Henderson UK Property funds.

THE SW HENDERSON UK PROPERTY FUNDS - SUSPENSION TO BE LIFTED

We intend to lift the suspension to our SW Henderson UK Property life and pensions funds on 14th October 2016. This means customers will be able to resume buying and selling units in the SW Henderson UK Property Funds from 12 noon on 14th October 2016.

Buying and selling of units in the Henderson UK Property Fund was suspended on 5th July 2016. The SW Henderson UK Property life and pensions funds invest directly into the Henderson UK Property Fund and were also suspended on 5th July 2016. Once Henderson has lifted its fund suspension, we’ll lift the suspension on the SW Henderson UK Property funds on the same day. Henderson has notified us of their intention to resume dealing from noon on Friday 14th October 2016. This is subject to change by Henderson: if there are changes, we will update this message.

Please note that the suspension will remain in place until 14th October. For more details about what this means, and about any exceptions, please see the detailed Q&As in our 20th July announcement towards the foot of this webpage.

We are writing to all customers who are invested in the SW Henderson UK Property life and pensions funds to advise them that we are lifting the suspension. If customers have instructed us to buy, sell or switch units from the SW Henderson UK Property Funds during the suspension period, this will take place as soon as possible after the suspension is lifted. Transaction notifications will be issued as usual. If a customer no longer wishes to proceed with any transaction, we must receive their instruction to cancel it by 5pm on 12th October 2016.

REMOVAL OF ‘FAIR VALUE ADJUSTMENTS’ FOR PROPERTY FUNDS

Tuesday 13 September 2016

The Fund Pricing Committee has reviewed the Fair Value Adjustment (FVA) on our property funds. This review has taken into account property valuations and our view of current market conditions.  Following that review, the FVA has now been removed, reflecting our view that the property market’s behaviour is returning to more normal patterns.  Consequently we view that no adjustment to fund value is necessary to ensure fair treatment of investors considering investing in, or withdrawing from, the funds.  The funds concerned are listed and described in the update of 16th August below.

We will continue to monitor market conditions and their impact on fund values to ensure that investors are always treated fairly.

Further reductions to ‘Fair Value Adjustments’ for Property Funds

Tuesday 16 August  2016

Following recent announcements regarding the application of Fair Value Adjustments (FVAs) to some life and pension property funds managed by Aberdeen Asset Management, our Fund Pricing Committee agreed to reduce the FVA from 7.5% to 5% on Tuesday 16 August.

The main funds affected are:

  • Scottish Widows Property Life and Pension funds
  • Clerical Medical Property Life and Pension funds
  • Halifax Property Life and Pension funds
  • Lloyds TSB Property life and pension funds

Some multi-asset funds are also affected because they are partly invested in property.

The impact of the EU referendum

Following the EU Referendum outcome there has been uncertainty surrounding the property market and the ease with which individual properties might be bought and sold at their current valuations. While we have not encountered any issues regarding our property funds, we are mindful of the risk that properties coming to market now do not achieve their recent valuations in terms of sale price.

This week’s decision to move the FVA down to 5% reflects our view of current market values of the funds’ property holdings and the market climate. We will continue to monitor market events closely to ensure that we reflect a fair price for those investors who might be considering investing, redeeming or remaining in the fund.

Please note that the funds’ overall value has been reduced by less than 5%, because the funds also hold cash and other liquid assets which are not affected.

FVA TIMELINE

Tuesday 5 July - We initially applied a 5% FVA of the value of direct properties in the funds
Friday 8 July - We increased the FVA to 10%
Friday 29 July - We reduced the FVA to 7.5%
Tuesday 16 August - We reduced the FVA further to 5% 

What is a Fair Value Adjustment?

A fair value adjustment means the fund is priced in a way which ensures investors receive a price that is in line with what is expected to be realised from a sale of the properties.

Who are the property funds managed by?

The Investment Adviser and Property Manager to the funds is Aberdeen Asset Investments Limited.

How long will this adjustment apply for and can it happen again?

We will continue to monitor market events closely. We have also enacted more frequent valuations on our underlying assets so that any emerging transaction data can be captured swiftly. As more transactional data emerges we believe the need for fair value pricing will fall away.

How can I find out the actual impact the FVA will have on the value of my encashment?

You can contact us to ask for a current fund valuation.

You will also be able to find the current fund price on our customer website for Scottish Widows and Halifax life and pension funds and here for Clerical Medical.

Should I make any changes to my investments?

Everyone’s circumstances are different and we aren’t able to give you advice on what is appropriate for you. As always, if you are considering your own position, you should remember why you invested in the first place and consider the lifespan of your investments. Most importantly, you should seek financial advice before making any changes to your investments.

Important information and Q&As for Customers invested in the Scottish Widows Henderson UK Property life and pension funds

Updated with detailed Q&As Wednesday 20 July 2016

Following an announcement by Henderson regarding the temporary suspension of dealing in their UK Property fund, we are not in a position to deal in the Scottish Widows Henderson UK Property life or pension funds, because these funds are direct links to the underlying Henderson fund. There are some exceptions to this, detailed in Q&A number 2 below.

Henderson has described their action as follows:

Temporary suspension of dealing in Henderson UK Property PAIF and Feeder Fund

With effect from 12 noon on 5th July, dealing in shares of the Henderson UK Property PAIF and units of the Henderson UK Property PAIF Feeder Fund has been suspended until further notice. Uncertainty generated by the European Union referendum has had a negative effect on market sentiment and led to substantial withdrawals from property funds. The dealing suspension will allow for an orderly sale of some properties while liquidity is restored and help ensure that the strong attributes of the portfolio in terms of its mix of properties and quality tenant base are not compromised while cash is raised ahead of a re-opening.

Henderson has said that they will announce a date for the re-opening of the fund when they are comfortable that they have sufficient cash to meet customer redemptions plus a sufficient liquidity buffer to meet fresh redemptions.

Please read the Q&As below for more details, and we will update this announcement if there are any significant developments.

Can I buy or sell units in the SW Henderson UK Property life/pension fund?

Not while the suspension is in place. We will accept your instruction to deal, but there will be a delay on acting upon that instruction. That delay will be until Henderson lifts the suspension or from 6 months of receipt of your instructions, whichever is the sooner.

If you have already placed an instruction to deal e.g. a switch or transfer, and want to change your mind, then just give us a call.

Are there any exceptions to the suspension?

Yes, there will be exceptions that are determined by your Policy Provisions. In these circumstances the delay period won’t be applied, including:

  • Critical illness claims
  • Maturities – when your pension policy reaches the Normal Retirement Date (NRD) or your House Purchase Savings Plan reaches its end date
  • Taking your Retirement Benefits(excluding full or partial pension encashments as defined in your Policy Provisions, if applicable. These can be subject to a delay and may depend on individual circumstances)
  • Lifestyling
  • Death claims
  • Payments from Unitised Annuities
  • Income withdrawal arrangements on‘drawdown’ plans
  • Existing regular withdrawals
  • Court directed sharing of pension policies on divorce.

What is happening to my regular premiums?

Any part of your regular premiums that would normally be invested into the SW Henderson UK Property fund will be redirected to the SW Cash fund. If you are happy for those regular premiums to be invested into the Cash fund then you need do nothing. If you would like to select a different fund then please get in touch.

For customers investing via the Retirement Account, any part of your regular premiums that would normally be invested into the SW Henderson UK Property fund will be redirected to the Control Account. If you would like to select a different fund then please get in touch.

How long will this suspension last?

Your Policy Provisions allow us to defer each customer’s instruction which relates to the SW Henderson UK Property fund for up to 6 months. Henderson has said that it will announce a date for the re-opening of its fund when it is comfortable that it has sufficient cash to meet customer redemptions plus a sufficient liquidity buffer to meet fresh redemptions. As soon as Henderson allows, we will reinstate dealing in the Scottish Widows life and pension fund links to the Henderson UK Property fund.

What happens to my valuation while the property fund is suspended?

Henderson will continue to calculate an indicative fund value and provide us with daily prices for the fund and this will be reflected in your valuation. The indicative value may not reflect the actual price achieved when the instruction is processed. Fund prices are available from our website here.

Why can’t I get my money back from the SW Henderson UK Property life / pension fund at this time?

The SW Henderson UK Property life and pension funds invest directly into the underlying Henderson UK Property fund. As Henderson has suspended all dealing in its fund we are unable to buy or sell shares in that fund on behalf of our life and pension fund customers.

This restriction is down to the decision made by Henderson’s on their property fund and is similar to the action taken by other similar fund managers of property funds.

Are any other Scottish Widows funds impacted?

We have made separate statements regarding the Scottish Widows Property life and pension funds, managed by Aberdeen Asset Management, which are also on this website page.

The SW Henderson UK Property fund is the only other bricks & mortar (direct) property fund offered to customers through our life and pension fund products.

The following funds gain their exposure to property through shares, rather than bricks & mortar, so they are more liquid and have not been impacted in the same way. They will however be affected by negative market sentiment on property as an asset class and their price will reflect that:

  • Scottish Widows European Real Estate life and pension funds
  • Scottish Widows Multi-Manager Global Real Estate life and pension funds
  • Scottish Widows UK Real Estate life and pension funds
  • SW Schroder Global Property Securities life and pension funds.

Retirement Account customers can access other similarly-impacted direct property funds, via the funds supermarket element of their policy. We will be writing to those customers separately about this.

Why have property funds been affected?

The EU Referendum outcome has resulted in uncertainty in relation to the UK commercial property market which has led to an unusually high demand from customers looking to sell their holdings in some UK property funds. To look after the interests of all customers, especially those remaining invested in a fund, the fund manager may have the ability to suspend trading while it goes through the process of selling enough property assets to meet customers demand to sell their investments.

Funds such as the SW Henderson UK Property life and pension funds are usually called direct (or physical) property funds, meaning that they invest (own, buy, sell) directly into commercial property. This is different to indirect (or equity) property funds which invest in the shares of companies involved in the property sector.

When demand from customers to sell their assets is unusually high, direct property funds can sometimes find it difficult to sell assets quickly enough at a fair market value to generate enough cash to pay these redemptions. This is because of the timescales involved in buying and selling property.

In order to protect the value for all customers, and especially those remaining in the fund, the fund manager can choose to suspend trading whilst it goes through the process of selling enough property assets to enable them to satisfy customers’ demand to sell their investment.

We will update these Questions & Answers with any further information as it becomes available.

 

Information for customers on the EU Referendum