Advisers are concerned that clients in the soon-to-be-defunct AIG Life UK enhanced fund are being forced to make an irrevocable decision about their investment without asset value information.
AIG Life is closing the fund on December 15 and is giving investors the choice of withdrawing their investment or transferring it to a protected recovery fund.
Policyholders who want to withdraw their investment can transfer 50 per cent of holdings now into the standard fund and request a withdrawal. The other half will be switched into the standard fund and made available by December 15 after AIG Life has sold off some assets to fund the withdrawals.
But investors must make the decision, which cannot be reversed, at the start of October. AIG Life says as it has to sell off assets to fund the withdrawals and the markets are highly volatile, it cannot predict what the value of the assets will be by mid-December.
Policyholders who want to keep their money invested will see their assets transferred into the protected recovery fund. AIG Life guarantees investors that they will receive at least the value of their investment at December 15 back in three- and-a-half years’ time.
One adviser, who does not want to be named, fears that the value of the assets being sold could drop to as little as 10 per cent of face value by December 15. He says: “AIG are telling investors to make a decision without any idea of what they are going to get back if they do sell. They are not treating customers fairly.”
Any loss made will not be covered by the Financial Services Compensation Scheme, which only pays out in the event of a company going into administration.
Seven Investment Management marketing director Justin Urquhart Stewart says that while it is an unfortunate situation for policyholders, it is a “miracle” that AIG Life is still in operation.
He says: “It is a hell of a lock-in for policyholders that wish to remain but in the current circumstances it is as good as it is going to get. Policyholders wanting to withdraw their investment could complain about having to wait until December for the full amount but that could endanger the rest of the fund. This is the best of a bad job.”
Baronworth Investment Services director Colin Jackson says: “It would come as no surprise if more funds were to follow. If I was an investor and I had money in a similar fund, I would be on the phone to my provider asking what the situation is.”
A working example prov-ided by AIG calculates the unit price to be 80 per cent of the enhanced fund value at December 14. But AIG reiterates that it is unable to predict what that percentage value will be until the assets are sold.