Canada Life has confirmed it has not restricted withdrawals from its life assurance bonds, even if investors have some of their investment in suspended UK property funds.
This comes after insurance giant Standard Life stopped some of its customers from cashing in any investments from their life bonds, despite only a small proportion of the money being held in property.
Eight large commercial property vehicles were forced to suspend trading at the beginning of July when thousands of investors decided to withdraw their money due to fears over the impact of the Brexit vote.
Financial adviser and director of advice firm Hill Grafford, Simon Every, said he has £6m of clients’ assets currently locked in by Standard Life.
Canada Life, however, has reassured investors it will not restrict withdrawals from non-suspended funds, even if a suspended property fund is among the assets within the life bond.
Early in July, Canada Life announced it had paused trading in six property funds, which include both pension and life funds.
It said the deferral, which can last up to six months, is to protect the interests of shareholders invested in property funds, which together have approximately £500m in value.
But the insurer said its onshore and international bonds have a flexible system in place which can accommodate “fund specific” withdrawals.
A spokesman from Canada Life said: “This approach is subject to our usual product rules, such as ensuring enough value is retained.
“It is also worth remembering that if a suspended property fund is the only asset held then we would queue the withdrawal until the suspension is lifted.”
Tony Catt, IFA and compliance officer at Anthony Catt Limited, said: “I think the insurance companies suspect that more people will want money from their bonds, which could cause the sale of assets as they are unlikely to hold enough funds in cash.
“This could have a damaging effect on the funds as they would not want a fire-sale.”
“But I’m not sure any one company is more ethical than any other insurance companies,” he said, adding the insurance companies are suffering a little from the competition for investment money from platform providers.
He said bonds have suffered as a ‘tax wrapper’ because mutual fund portfolios offer greater flexibility and the advantages of bonds have eroded over time.
“From the consumer point of view, it is a concern when companies start to ‘gate’ funds, and it is almost a self-fulfilling prophesy that the message will cause more people to want their money out.
“Consumers want to know that their money is “safe” and the gating of funds does nothing for their confidence.”
katherine.denham@ft.com
