For years my pension had been invested in a fund that was managed by Standard Life, but after being disappointed with the performance, I decided to take matters into my own hands.
In March last year I invested my £73,926 pension in four funds through Standard Life’s website. One was the SL Aviva Investors Property Pension fund.
I invested £14,785 in this fund (and a total of £59,141 in the three other funds) but, unknown to me, it was actually closed to investors. Even though the fund had stopped trading, Standard Life somehow let me buy shares. At the end of May last year I had a statement saying my pension portfolio was worth £175,595. The growth was mainly from the property fund, with the value of that investment listed on my statement as £115,212.
To give me some security, I decided to sell a big chunk of the shares in the property fund, then moved £89,865 into Standard Life’s cash account, which paid a flat rate of interest. Standard Life confirmed the transfer and sent a statement. This left me with about £25,346 still invested in the property fund.
I was pleased when my pension continued to grow this year, reaching £260,797 by June. Again much of this growth was from the property fund, which had increased in value from £25,346 to £90,265. There was also £93,299 sitting in my cash account.
My partner and I made several life decisions based on the value of my portfolio: I surrendered my life assurance policy, we reviewed our retirement dates and gave notice for our tenants to move out of our buy-to-let property so we could renovate it. We also went on an expensive holiday in December.
Shortly after seeing the value exceed £260,000 I checked my Standard Life account again and was distraught to see that £183,564 had been wiped off my portfolio. The cash account containing £93,299 and the property pension fund containing £90,265 had been removed as if they had never existed. My account said my portfolio was now worth £80,797 based on my £59,141 investment in the other three funds. This represented a profit of £21,656 or 37 per cent over 16 months.
When I spoke to Standard Life, it initially said my portfolio had been worth about £80,000 for the past four years. I sent statements from the previous year that said it had been worth more than £175,000.
After several emails and phone calls, Standard Life eventually admitted it was at fault for somehow letting me invest in a closed fund. It has returned my original property fund investment of £14,785.
This has now put us in a really difficult position. We no longer have our life assurance policy and we never would have spent that money on the holiday if we had known there were issues with this pension. I had planned my retirement around this and now face working for an extra five years. What a mess.
I am absolutely devastated by this situation. Standard Life should have corrected its mistake immediately, but it was 16 months before I knew anything about it.
Name and address supplied
Katherine Denham writes
The value of your pension increased by a whopping 252 per cent in just 16 months, which did sound far too good to be true. Such a surge might prompt some investors to wonder if there had been a mistake somewhere along the line, and sadly that turned out to be the case because you should not have been able to invest in that Aviva fund in the first place.
This property fund was one of several that stopped trading during the pandemic. Many of these funds invested in commercial buildings such as office blocks, shopping centres and warehouses, but back in 2020 there was a huge amount of uncertainty around property valuations. Many people sought to cash in their investments, but the properties couldn’t be sold quickly enough to meet the withdrawal requests. If fund managers are forced to sell quickly then this also increases the risk of properties being sold at a loss. As a result, several investment companies were allowed to suspend trading in their property funds, therefore stopping investors from being able to buy or sell their shares. While this is frustrating for investors because it means their money is locked in the fund, it is a mechanism that is actually designed to protect them.
Some property funds eventually started trading again, but Aviva Investors decided to close your fund in 2021. Yet even though this fund was in the process of being wound up, in March last year Standard Life’s system showed that it was open to trade and so, it said, your £14,785 was invested. You were sent a statement which said that you held more than 9,000 shares in the fund and when you later sold some, this left you with nearly 2,000 shares.
Standard Life told me this was an IT error with its system and that Aviva Investors was not to blame for this mistake. It also said you were the only investor to be affected by this.
Laith Khalaf from the investment company AJ Bell explained that when a fund is closing down it has to sell all its assets and return cash to shareholders. He said an underlying portfolio of buildings takes time to sell and that fund managers typically sell them gradually to get the best value for investors. This process can take months or even years, and each time a fund manager sells a property, these proceeds are distributed to investors, leading to regular windfalls.
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These windfalls caused the fund price to go up, so you thought it was performing exceptionally well. You made some massive decisions on that basis: it affected how you spent your money, splashing out on a fancier holiday than you otherwise would have taken, and it prompted you to change the goalposts around your retirement.
When Standard Life realised its mistake, it initially corrected your pension to reflect the fact that you should not have been allowed to invest in the closed fund, removing all the returns you had enjoyed from that investment. I could just imagine how horrified you must have been to see that the value of your pension pot had shrunk £183,000 overnight.
But it wasn’t your fault that Standard Life seemed to have invested in the fund on your behalf when it was closed, and I still do not understand how that was possible.
Standard Life’s parent company Phoenix said: “We acknowledge that a mistake occurred in the administration of this pension plan and sincerely apologise for the impact this has had on him. We are committed to resolving this matter fairly and transparently and have discussed this matter with him to make things right.”
It offered you £78,514, which, added to the return of your original £14,785 investment, gave you the £93,299 that had been sitting in the cash account before its correction. You also still have the £80,797 invested in the three other funds.
You were disappointed that it wouldn’t pay you the £90,265 from the remaining shares you held in the property fund, but have accepted a compensation payout of £1,000.
This gives you a total of just over £175,000 from your investment of almost £74,000 in March last year, which still amounts to a very impressive return of 136 per cent in just 16 months.
You said: “The way Standard Life has conducted itself has been disgraceful and I no longer trust the company.” I certainly wouldn’t blame you if you decided to transfer your pension elsewhere.
£1,693,333 — the amount Katherine Denham has saved readers of The Times and Sunday Times this year
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