Changes to the L&G Property Fund

You might have noticed some transactions on your Transact accounts relating to the Legal and General Property Fund. You do not need to take any action in this regard and these movements are nothing to worry about. It is simply an administration exercise relating to some changes within this fund.

This is one of the funds in your portfolio and is one which we use to provide exposure to the property asset class. It has recently undertaken an internal change in how the fund is structured for tax purposes. It will now be structured as a Property Authorised Investment Fund (PAIF).

Very little has changed within the fund, but it is now able to benefit from a special tax advantage. A property fund gets income from various sources. This income is treated as a dividend which includes a tax credit which can’t be retained. With a PAIF, the income streams are separated and the varying ones can be treated separately for tax purposes. This means property rental income and interest can be paid gross to eligible investors and the income no longer subject to 20% tax within the fund.

Any future investments you make into your portfolio will be invested in this new PAIF. However, in order to stop you having two types of what is essentially the same fund, all existing L&G Property fund units you held have automatically been converted into units in the new PAIF version. No buy or sell costs have been incurred as part of this transaction.

Unfortunately, an anomaly will remain for anyone making regular contributions. This is because there was a compulsory time gap of just under a month between Manse Capital making the election to change existing funds to the PAIF version and the actual conversion date. In between the two, a regular contribution has been processed and purchased funds in the old fund, but these have not been converted to the new one. There are therefore a small amount of funds remaining in the old version of the fund. These will be swept up as part of your next rebalance and no action is required in the interim.

I hope that this makes sense but should you require any further information on these proposed changes please don’t hesitate to contact us.