Aviva lifts withdrawal restriction

Aviva will not impose withdrawal restrictions on investors with money in its property fund

Insurance giant Aviva has announced it is no longer imposing withdrawal restrictions on investors with money in its property fund.

Since January, people who wanted to cash in life and pensions policies held in the group's unit-linked property fund early have had to wait for up to six months after their request before they could get their money.

The group introduced the restriction following steep falls in the value of commercial property, saying the move gave it longer to sell properties at an acceptable price.

But the insurer said it was lifting the restrictions following improvements in the commercial property market and a recovery in the cash balance held by the fund.

At the time the withdrawal restriction was introduced, the proportion of cash held by the fund had dropped from 7% to 3.1%, although it has since increased to 12%.

The fund currently has around 200,000 investors, with 12,000 people cashing in their investment early or moving it elsewhere while the withdrawal restriction was in place.

David Barral, marketing director at Aviva, said: "Aviva introduced deferred withdrawals from the fund to safeguard the interests of all investors in what was an extremely difficult time for the UK commercial property market.

"We understand that restricting withdrawals was inconvenient for some investors but this enabled us to sell properties at more attractive values, which was in the interests of the majority of investors. With improving conditions in the commercial property market, Aviva is now confident that current cash levels are sustainable. This enables us to lift the current restrictions for all investors in the fund."

The value of Norwich Union's property fund slumped from £5.1 billion at the end of 2007 to just £2.9 billion at the end of last year due to steep falls in the value of commercial property. It had fallen further to £2.6 billion at the end of October.

Mark Dampier, head of research at Hargreaves Lansdown, said he did not think the removal of the withdrawal restrictions would lead to a rush among investors to exit the fund. He said: "Those who wanted to exit have already done so. It looks as though money will be coming back into the fund, particularly with interest rates so low."