Norwich Union defers settlements on Property Fund

Norwich Union today advises that it has temporarily deferred settlements on its unit-linked Property Fund.

The Norwich Union Unit-Linked Property Fund (Life and Pensions) invests in UK commercial property. Trading conditions in the commercial property market have tightened significantly over the past 12 months. The shortage of credit has reduced the number of buyers and property assets are taking longer to sell. During this time, a number of other UK funds have introduced periods of deferral.

Protecting Investors

Deferral is a temporary measure to protect all investors in a fund. It means that requests to redeem are held on file and executed up to six months later. This gives the fund a longer period in which to sell the properties it holds at an acceptable price.

How the Deferral Period works

While the deferral period is in place transactions including surrenders, switches, partial surrenders, transfers, and new requests for automatic partial withdrawals will be deferred for up to a maximum of six months.

There are a number of circumstances where eligible customers will still be able to instruct redemptions as usual or where the deferral period will not apply:

Policies with a contractual maturity or retirement date (eg: pensions and endowments)
Regular withdrawals that have already been set up (eg: bond investors who take a regular income from their investment)
Critical illness, terminal illness, and total permanent disability claims
Claims where the policyholder has died

Contacting Investors

Norwich Union will be contacting existing investors who make regular payments into the fund and independent financial advisers who represent a client who has invested in the fund. Further information is also available on norwichunion.com.

David Barral, marketing director at Norwich Union, said: "We recognise that this will be disappointing for some investors who may want immediate access to their capital. However, this action is in the best interests of investors by protecting the long-term value of their investment and avoiding having to sell properties below their market value.

"In the last 12 months a number of other UK funds have introduced deferments. During this time we have actively managed the fund to support those investors requiring immediate access to their investment. However, as a result of the difficult conditions in the commercial property market, we have taken the decision to defer settlements to enable us to manage redemptions appropriately.

"Despite the current short-term difficulties, we are confident of the long-term prospects for commercial property. It remains an important part of a balanced, long-term investment portfolio."

The changes apply only to the Norwich Union Unit-linked Property Fund (Life and Pensions) available through life onshore bonds and pensions. Other UK property funds offered by Norwich Union, including Aviva Investors Property Trust (formerly Norwich Property Trust), continue to trade as normal. Norwich Union's equity and bond funds are also unaffected by this change.