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Skandia closes guaranteed fund as it seeks safe haven

Skandia has closed it guaranteed pension fund to new business after falling equity markets forced it to move into gilts to meet its guarantees.

The percentage of gilts in the fund has now risen to 60 per cent, at which stage the company decided the potential for further growth was too limited for it to accept new business into the fund.

Savers who have taken out contracts since the beginning of July, when the asset mix changed, are being offered a backdated reallocation of funds into the Skandia deposit fund, from which they are free to take any investment decisions.

The guaranteed pension fund was launched in 1998 as the first transparent ringfenced with-profits-style fund. It has £200m under management and 14,000 policyholders.

Skandia has this week sent out letters to all affected policyholders and their advisers.

Head of product marketing Peter Jordan says: “Transparency is a tough act. It was quite clear that we had to take a responsible attitude for new investors. The fund is still solvent and set up to meet its guarantees, some of which are very valuable. We have to measure solvency just for this fund whereas other with-profits providers can measure it across the board. There was nowhere left for us to hide.”

Holden Meehan director Amanda Davidson says: “The responsible attitude is positive but guarantees become more and more difficult to fulfil as equities continue to fall. Just because something is more transparent does not mean it is less risky.”

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