The Pensions Regulator has released guidance warning that trustees need to comply with the six-month transfer deadline even if the member is invested in a gated fund.
In the guidance updated in January, TPR acknowledged the payment of a cash equivalent transfer value “is likely to be problematic where all or part of the member’s investment is held in a gated fund”.
However, the regulator does not believe it has legal powers to grant an extension to these transfers’ six-month deadline.
“It is important that you prioritise these requests as you would any other transfer, and we would expect you to do everything you can to process them promptly — we may fine you if you fail to take all reasonable steps to pay a transfer value within six months of the application date,” the guidance stated.
Although the watchdog provided trustees with some advice on what to do in these instances, the new guidance highlights that TPR can impose penalties where trustees have not taken "all reasonable steps to complete the transfer process in time”, warned Chris Harper, senior associate at Squire Patton Boggs.
Mr Harper said: “TPR’s guidance suggests approaching the member’s chosen provider about accepting a partial transfer, with a follow-up payment when the fund is reopened.
“However, a provider does not have to agree to that. Even if a provider is willing to accept that type of arrangement, trustees would not actually be complying with what the member originally asked them to do and should therefore proceed very carefully.
“They will also not be able to rely on a statutory discharge from liability in those circumstances.”
If trustees believe they will not be able to comply with the statutory timeline of six months, they should “make sure they actively engage with the gated fund and the member’s chosen provider, Mr Harper advised.
In March, a string of asset managers closed their doors to dealing in their open-ended UK property funds amid the coronavirus crisis.
FTAdviser previously reported that property funds have been able to reopen since the Royal Institution of Chartered Surveyors recommended in September a general “lifting” of material valuation uncertainty from areas of UK real estate.
Material uncertainty means valuers were unable to value the assets within the funds with the same degree of certainty as would otherwise be the case.
Rics’ announcement essentially allowed property funds to reopen if the asset manager saw fit, but many portfolios — such as M&G’s, Aviva’s and Janus Henderson’s — remain gated.
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