Property fund questions and answers

We were given no notice that the property funds were going to be suspended, and had to decide where we would invest any members’ contributions that we received in the following days. We chose the Fidelity Cash Fund because it was available within all the plans we administer. This ensured that members affected by the suspensions could continue to make contributions. Now that the funds have been suspended for some time, we have reviewed the position and don't believe it is appropriate to leave members’ money invested in a cash fund. In the time since the property funds were suspended, we have added the Fidelity Diversified Markets Fund to those plans that did not previously offer it.

The Fidelity Diversified Markets Fund holds several different types of investments and has been selected for use in this kind of situation, when a fund is unavailable for investment. We believe it is a more appropriate option as a long-term holding than a cash fund. It has more potential for growth and less inflation risk than cash. Guidance from the Department for Work and Pensions and The Pensions Regulator states that when a fund is suspended, any alternative fund that members’ money is directed into must meet the standards of a ‘default arrangement’. This means it must be suitable as a long-term holding for unengaged pension plan members. As part of our house default lifestyle strategy, the Fidelity Diversified Markets Fund is reviewed regularly by internal and external committees, who assess its suitability as a long-term investment.

We were given no notice that the property funds were going to be suspended, and had to decide where we would invest any members’ contributions that we received in the following days. We chose the Fidelity Cash Fund because, unlike the Fidelity Diversified Markets Fund, it was available through all the plans we administer. This ensured that members affected by the suspensions could continue to make contributions. In the time since the property funds were suspended, we have added the Fidelity Diversified Markets Fund to those plans that did not previously offer it.

Unfortunately, we cannot re-direct just one part of a contribution into the default strategy. If we move part of a regular contribution into the default strategy for a self-select member, all of their assets and future contributions would have to be moved rather than just the part relating to the suspended Property Funds.

The Diversified Markets fund has now been added to any plans that didn't previously offer it and our fund suspension policy has been signed off by the relevant governance forums. So, if a fund is suspended in future, any contributions that should have been invested in it will be re-directed to the Fidelity Diversified Markets Fund, and we will contact the affected members to tell them what has happened. Any contributions that are diverted into the Fidelity Diversified Markets Fund will remain in the fund unless a member chooses to switch them into a different fund.

We plan to start changing members' contribution instructions in stages from the end of August, and the work should last about eight weeks.

No. We should be able to change the instructions in a single day. As there will not be a blackout, it is possible that a member could give us their own instructions to change their contributions on the same day that we are planning to change them. We are taking steps to ensure that any conflicting instructions are highlighted and can be avoided.

Yes. We are going to do this within 5 working days once the future fund contributions have been changed.

We plan to start switching members' investments in stages from the end of August, and the work should last about eight weeks.

No. We should be able to carry out the switches in a single day. As there will not be a blackout, it is possible that a member could give us their own instructions to switch investments on the same day that we are planning to switch them. We are taking steps to ensure that any conflicting instructions are highlighted and can be avoided.

No. When a suspension is lifted, we cannot assume members will want their contributions, or money that has built up in any alternative funds, to be moved back to the property fund. The suspensions may have changed their view of property funds, the markets may have changed and the members’ investment goals may be different. We will contact members when the suspension is lifted on a fund they have previously invested in and they will be able to decide whether they would like to make any changes to their future contributions or to the investments already in their pension.

There are no charges for members to change their investments, or for the changes we have made. However, all funds have management, transaction and other charges that affect their price and the value of a member's account. Information about these charges can be found on the fund factsheet.

We are currently taking legal advice on whether we need to change our Policy Conditions on this point. If we do, we will notify members of the change.

We will not make any changes to their investments or their instructions for future contributions.

We will be writing to members after we have changed their contribution instructions and switched their investments out of the Fidelity Cash Fund. As a result, it will not be possible for us to know that they would have preferred to stay in cash. Once the changes have taken place, members will have the option of changing their contribution instructions and their investments back to cash, or into any other fund, if they wish.

The regulator has made it clear that pension plans must use a suitable ‘deemed default’ option if they are moving money without members’ consent. This means the chosen fund must be suitable as a long-term holding for unengaged members. As we do not believe cash is suitable as a long-term investment, because of its low growth potential and the risk of inflation, we will re-direct members’ contributions to the Fidelity Diversified Markets Fund in the event of any future fund suspensions or closures.