Standard last week said that it would compensate investors for the 5 per cent reduction by pumping £100m into the fund. It will continue to hold over 40 per cent of the fund’s value in mortgage-backed securities, which it expects to return to par within two years.
Hargreaves Lansdown says investors could win twice if they stick around to witness the assets come back but it warns that the fund could fall again.
Head of pensions research Tom McPhail says: “The fund still holds asset-backed securities and while Standard Life has reiterated its belief that the fund remains a sound investment option, further losses cannot be ruled out.”
Richard Jacobs Pensions & Trustee Services managing director Richard Jacobs has moved all his clients out of the fund.
He says: “I am grateful Standard has paid up but they are not out of the woods yet – there could be another drop. I have got all my clients out of the fund already. My clients wanted their money in a cash fund and this, we all know now, is not a cash fund.”
Pharon IFA director Nick O’Shea says a mass outflow of cash could pose a problem to the fund but he believes there is no blanket answer.
He says: “What you have got to watch, of course, is the fact that there could be a massive outflow of money. I believe you have to discuss it on an individual basis with each client, look at the pros and cons and take it from there.”