Aviva fund freeze comes to an end

The fund used to be under the Norwich Union brand

Customers of an Aviva property fund whose accounts were frozen are now able to withdraw their funds.

A quarter of a million savers were told in January that they would have to wait up to six months to withdraw money.

The unit-linked life and pensions property fund had come under the Norwich Union brand.

The insurer said the difficulties in selling the underlying investments held by the fund had eased as the property market outlook has improved.

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

Restrictions lifted

"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," said David Barral, marketing director at Aviva.

At the time the withdrawal restriction was introduced, the proportion of cash held by the fund had dropped from 7% to 3.1%, a time that the group described as a "difficult period".

It has since increased to 12%.

It looks as though money will be coming back into the fund, particularly with interest rates so low Mark Dampier, Hargreaves Lansdown

"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," Mr Barral said.

He added that most investors only had to wait four months from the date of their request for withdrawals to go through, rather than six.

"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," he said.

The value of the property fund has nearly halved from £5.1bn at the end of 2007.

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.

"Those who wanted to exit have already done so," he said. "It looks as though money will be coming back into the fund, particularly with interest rates so low."