Scottish Equitable has ditched its £10m property fund and invested its clients in Norwich Union's Property unit trust.
The life office has written to pension policyholders invested in the fund to explain the highly irregular move.
ScotEq claims the fund was too small to make it financially viable to manage and also says it does not have a suitable property desk.
It is thought to be the only IFA-led life office which does not have its own property fund. The move comes despite ScotEq's pledge to become a major force in asset management and the aggressive expansion of its investment team in the past year.
The decision will mean a 75 per cent increase in annual management charges for clients to 1.75 per cent. But ScotEq is allowing investors to switch funds free of charge until May.
ScotEq moved the fund to NU's £192m fund last summer but only recently wrote to clients because of legal difficulties over the switch.
ScotEq chief investment manager Tom Crombie says: "It is unusual for a life office because historically they have property funds. But we are saying we cannot do it all."