Changes in UK pension funds strategy and increased costs from regulation have led Baillie Gifford to close its range of life company funds, with assets worth £9.6bn.
Following a strategic review of the insurance business called Baillie Gifford Life, its board concluded that the advantages to clients of these type of policies “have almost entirely been eroded”, and ceased new contracts of insurance on 28 February.
According to an annual report, the company has agreed on a two-year run off plan, which includes the closure of all its unit-linked pension funds.
The Edinburgh-based asset manager is now “seeking investor approval to transfer their life company investments to equivalent (open-ended investment companies] Oeic funds, managed by Baillie Gifford,” a spokesperson revealed.
He said: “Investors who transfer their investments will continue to hold a Baillie Gifford pooled fund managed by Baillie Gifford’s experienced investment teams, in line with its long-established philosophy and investment approach.”
However, investors who do not wish to transfer their investments to Oeic funds can choose to liquidate them for cash.
Other reason for the closure of the funds is the added costs brought about by the implementation of Solvency II, the new regulatory regime for insurance companies in the European Union.
Under the new rules, pension providers must hold significantly increased levels of capital and have additional governance and reporting requirements.
Clients of the insurance scheme structure also have less tax benefits, due to changes in the legislation and in the rules governing Oeic funds.
The asset manager also concluded that due to structural changes in the UK pensions industry, these clients are increasingly accessing Baillie Gifford strategies through Oeic funds than through via life company funds, which is expected to continue in the future.