Fund suspensions: when you cannot sell

A suspended fund is one whose manager has stopped dealing, so investors cannot buy or sell their units until it reopens. Your money is not gone: it stays invested in the fund's underlying assets and its value keeps moving with them. What you lose is the ability to get out on demand, sometimes for months. The best known UK example is the Woodford Equity Income Fund, frozen in 2019 when there was not enough easily accessible cash to pay exiting investors, because too much of the fund sat in illiquid assets that are difficult to sell¹.

Suspension is a feature of how most funds are built, not a fault in your platform or account. Traditional funds are open-ended: when you sell, the fund itself has to hand you cash, which means selling underlying assets to raise it. If those assets cannot be sold quickly, the manager can stop dealing to protect the investors who remain. Investment trusts and exchange-traded funds (ETFs) work differently, and are far less likely to be suspended, though they carry their own risks².

This page explains why suspensions happen, what your options are while a fund is frozen, the charges that continue, and where the rules and protections stop.

How a fund works: your money pooled with other investors

A fund is a collection of lots of different people's money, managed by a professional fund manager who invests it across a range of different assets, such as shares, property or bonds, depending on the fund⁷. Investment funds, sometimes called mutual funds, pool your money with that of other investors to give you a stake in tens or hundreds of stocks, bonds or other types of investment³. You can invest small amounts, starting from around £50 a month depending on the fund⁸.

Pooling brings several things an individual investor would struggle to get alone. You gain access to a wider range of investments than you could normally buy yourself, your money is managed by an expert fund manager, and it is spread across many different investments, which spreads risk and minimises the impact of any one company going bust or performing badly⁹. Management and admin costs are shared among all the investors, and you can choose funds that target specific markets, industries, or even small unlisted businesses, or funds that invest in line with your personal values⁹.

The pooling is also why suspension exists. Because everyone's money sits in one shared pot of assets, a wave of selling by some investors affects everyone else in the fund. The manager cannot pay one group out of a separate till: the cash has to come from selling the shared assets. When those assets are hard to sell, the manager's options are to sell at fire-sale prices, which hurts the investors who stay, or to stop dealing altogether. That is the trade-off at the heart of the open-ended structure, and it is why the fund's structure matters more than its name when you are thinking about how easily you could get out.

Open-ended or closed-ended: why structure decides whether you can sell

Funds split into two broad structures, and the difference between them is what determines whether a suspension can happen to you.

Open-ended funds, which include unit trusts, create and cancel units as investors buy and sell. They "can issue or redeem units at any time to satisfy investors who want to buy into the fund or sell out of it"². When you sell, the fund redeems your units and pays you cash raised from the fund's own assets. That is the mechanism a suspension blocks: if the manager cannot sell the underlying assets quickly, it cannot pay you.

Investment trusts are closed-ended. They "issue a fixed number of shares when they're set up, which investors can buy and sell on the stock market"². Being closed-ended means they have a fixed number of shares in issue at any one time¹⁰. When you sell, you are not asking the trust for cash: you are selling your shares to another investor through the market, so the trust never has to sell its assets to pay you. That is why a closed-ended structure does not need to suspend dealing in the way an open-ended fund does.

Exchange-traded funds sit closer to the trust side of this divide. They "differ from traditional funds as they are listed on a stock exchange, so you can buy and sell them at any time that the exchange is open"³. ETFs are a type of fund that usually invests across an entire index, like the FTSE 100, and are usually cheaper than other funds known as mutual funds¹¹.

Closed-ended structures are not risk-free, and it matters to be clear about what they protect you from and what they do not. Investment trust shares are bought and sold like any other share, and their price depends on what other investors will pay, not just on the value of the underlying assets. More often than not, investment trust shares tend to trade at a discount, meaning less than the value of the underlying assets¹². Investment trusts are also likely to be more volatile than equivalent funds, because of the combined effect of gearing (borrowing to invest, which unit trusts are not permitted to do) and the discount¹³. Real estate investment trusts are riskier than other trusts, in part because it is harder to sell the underlying real estate investments if investors withdraw their money⁴. So a trust or ETF removes the suspension risk, but replaces it with price risk: you can always sell, but not necessarily at the price you hoped for.

Options while a fund is suspended

When a fund is suspended, the first thing to know is what you cannot do: you cannot sell your units, and you cannot force the manager to reopen dealing. The fund's value continues to be calculated and it keeps moving with the underlying assets, so your holding can fall as well as rise while you wait. In the Woodford case, the fund was frozen to prevent anyone else from taking out their money, and it was later wound up rather than reopened¹.

What you can do falls into a few categories.

Wait for the fund to reopen or wind up. Many suspensions end with the fund reopening; others end with the fund being wound up, meaning its assets are sold over time and the proceeds returned to investors. FCA rules recognise this state directly: units in an authorised fund that is in the process of winding up or termination are treated as a distinct case in the regulator's rules on what firms must do for customers¹⁴. If a fund you hold moves from suspension to wind-up, the manager must write to you explaining what happens next and the timetable.

Transfer the holding rather than sell it. You may be able to move a suspended fund between platforms as a holding, without selling it. Platforms commonly support transfers of investments as they stand, and one major platform states that in most cases investment account transfers take 2 to 6 weeks, though some can take longer⁵. A transfer does not get your money out, but it can move the fund to a platform you would rather deal with, or consolidate holdings, while you wait. Check with both the sending and receiving platform first, because a suspended fund is not always eligible for an in-specie transfer.

Keep contributing, or stop contributing. While a fund is suspended, buying is usually stopped along with selling. Regular monthly investments into that fund will typically pause or need redirecting. You can usually continue contributing to other funds in the same account.

Complain if something was wrong. Suspension itself is not grounds for a complaint: it is a mechanism the rules allow. But if you were sold the fund without the risks being properly explained, or the manager breached its own rules on how much could sit in illiquid assets, that can be. The Financial Ombudsman Service follows the Financial Conduct Authority's Dispute Resolution Rules when deciding complaints¹⁵, and it can look at how a fund was sold to you as well as how it was run. The Woodford case produced a compensation scheme for some investors, which shows the route a large-scale failure can take¹.

What a fund costs you while your money is in it

Charges do not pause when dealing does. You will have to pay an annual management fee for a fund, which can differ significantly from one fund to another⁴, and it continues to be taken while a fund is suspended, because the manager is still running the underlying investments.

The main costs to know about are the ongoing charge figure (OCF), an annual percentage of your investments paid to the fund manager however the fund performs; performance fees; trading fees and stamp duty reserve tax; exit fees; and platform fees³. Tracker funds are generally much cheaper than active funds, sometimes costing as little as 0.1% a year, which is £1 for every £1,000 you invest³. Passive funds usually cost less to run, with ongoing charges sometimes as low as 0.1% a year¹⁶.

The gap between a cheap and an expensive fund compounds over time. Which? gives the example of £1,000 invested in a fund charging 0.1% and a fund charging 1%, both growing at 5% a year: after five years the cheaper fund would be worth £1,275 and the more expensive fund £1,214, a gap of £61³.

Two further points matter when you are weighing costs. First, where a fund invests in other funds, the costs of those underlying funds are part of what you pay. FCA rules require that where a fund invests its assets in one or more other funds, the costs and charges for each of the investee funds which the fund will incur as an investor in them are disclosed¹⁷. Where the underlying investment is a closed-ended fund, such as an investment trust, its ongoing costs need not be aggregated into the investor fund's ongoing costs figure, but they must still be disclosed in the product summary¹⁸. So a fund's headline ongoing charge can understate what you pay in total if it holds other funds.

Second, the platform's own charges sit on top of the fund's. You might be charged each time you buy and sell a share, investment trust or exchange-traded fund, while fees for buying and selling traditional funds are less common¹⁹. Investment trusts are treated by platforms in a similar way to shares, so you will likely pay one-off dealing fees when you buy and sell them, even if fund trading on your platform is free¹³. Specialist trusts, including those investing in property, private equity or infrastructure, are likely to have higher charges than those investing in conventional assets such as shares or bonds²⁰, and the same comparison is made in the AIC's guidance on costs²¹.

Where to find the rules on selling in a fund's documents

A fund's own documents are where its dealing rules live, and they are the place to check before you invest, not after a suspension. The prospectus and the fund's key information documents set out how often the fund is priced and dealt, whether there are any notice periods or limits on withdrawals, and the circumstances in which dealing can be suspended. Factsheets show the ongoing charge and recent performance.

For funds that invest in other funds, the rules require specific disclosure. The product summary for a fund investing in funds managed by the same person must disclose any actual or potential benefits to that person arising from the investment in the investee funds¹⁸. This matters because it exposes where a manager earns more by holding its own funds inside your fund, a cost you would not see in the headline charge alone.

For investment trusts and ETFs, the equivalent information is in the company's reports and accounts and its key information document, but the dealing rules are simpler: you sell on the stock market whenever it is open³. The question to ask of any fund before you buy it is not just what it charges and what it holds, but how you would get out, and what could stop you. The fund documents answer that question, and a fund that deals daily in liquid assets such as large company shares presents a very different exit risk from one that deals monthly in property.

If a fund you hold is suspended, the manager and your platform must tell you, and further updates should follow through the same channels. Keep those communications: they set out the terms on which the suspension operates, any deadlines for decisions, and what happens if the fund moves to winding up or termination, which the FCA's rules treat as a distinct stage with its own requirements¹⁴.

Money needed within five years does not belong in a fund

The clearest protection against a suspension hurting you is not being in a position where you must sell. Guidance across the industry is consistent on the time horizon: money invested in funds is generally expected to be kept invested for five to ten years, or longer⁶. The same guidance appears in the AIC's introductions to funds and to risk⁹, and in its guide to common investor mistakes, which notes that the value of investments will inevitably go through ups and downs along the way⁷.

Official guidance points the same way for people managing money for someone else. GOV.UK's guidance for attorneys and deputies notes that many financial advisers will suggest aiming to hold non-cash and deposit investments for a minimum of 5 years²².

The reason this matters for suspension specifically is that a suspension turns a paper wait into a forced wait. An investor with a ten-year horizon who cannot sell for six months has lost some flexibility, but not the plan. An investor who needed the money for a house deposit or a bill has lost the use of it for an unknown period, and may have to borrow elsewhere in the meantime. Because you cannot know in advance when a suspension will come, the only reliable defence is not to rely on the money being available on a particular date.

That has a practical implication for how you hold money you will need at a known time. Savings accounts and cash ISAs give access on defined terms; funds do not promise a date. If some of your money must be available on a schedule, the standard approach is to keep that portion in cash and invest only the remainder, accepting that the invested portion is committed for five to ten years or longer⁶. The choice between saving and investing is covered in when investing makes sense instead of saving, and the general rules of investing are covered in how investing works.

The value can fall while you wait

Suspension locks the door, but it does not lock the price. While a fund is suspended, its underlying assets are still valued, and the value of your holding can fall. That is the second half of the risk, and it is the one investors sometimes miss: the wait and the loss can arrive together.

Risk warnings exist for this reason. Investment funds and ETFs are given a risk rating on a 1 to 7 scale, and knowing your own attitude to risk makes it easier to pick funds at the right point on that scale²³. A fund holding hard-to-sell assets will typically sit towards the riskier end of that scale, and the risk of suspension is part of what that rating is telling you.

Some risks are specific to the underlying assets. Real estate investment trusts are riskier than other trusts, in part because it is harder to sell the underlying real estate investments if investors withdraw their money⁴, which is the same liquidity problem that suspends open-ended property funds. Investment trusts are likely to be more volatile than equivalent funds because of the combined effect of gearing and the discount¹³, and gearing itself, borrowing to invest, magnifies both gains and losses in a way that unit trusts, which are not permitted to gear, do not experience¹².

Inflation is a quieter risk that works while you wait. FCA rules require firms to warn consumers where the value of their drawdown fund is at risk of being eroded by inflation²⁴, and the same force applies to any fund holding that cannot be sold: if prices rise while your money is locked in, its real spending power falls even if its nominal value holds up.

The practical reading of all this is that a suspension is not a pause in risk, it is a concentration of it. You keep the market risk, you keep the inflation risk, and you add the risk of not knowing when you can get out. Investors in the Woodford fund experienced exactly this sequence: the fund was frozen in 2019, and the underlying illiquid assets then had to be sold over a long period to return money to investors¹.

Where protection and help stop

It is worth being precise about what protection does and does not cover here, because suspension sits in a gap many investors do not expect.

A suspension is not a failure of the platform, the manager or the compensation scheme, and it does not by itself trigger any payout. FSCS protection covers the failure of authorised firms, not the falling value of investments or the temporary inability to sell them. Poor investment performance is not something the FSCS compensates, and a fund that falls in value while suspended is treated as performance, not failure. What FSCS can cover is the collapse of the platform or fund manager holding your money, which is a separate event from the fund being suspended.

The Financial Ombudsman Service is the route if you believe something was done wrong: how the fund was sold to you, whether the risks were explained, or how the manager ran it. The ombudsman follows the FCA's Dispute Resolution Rules in deciding complaints¹⁵. Complaints normally go to the firm first, and the firm must respond before the ombudsman will look at the case.

For the Woodford Equity Income Fund, a compensation scheme was set up for some investors¹, which shows that redress routes can open after a large failure, but that was specific to that case and its findings, not a general right that follows every suspension.

Free, impartial help is available at several points. MoneyHelper, the government-backed money guidance service, explains investments and how to check a firm's authorisation. The FCA Register shows whether a firm is authorised, and the FCA's own disclosure rules govern what fund documents must tell you about costs, including the costs of underlying funds¹⁷. If you are deciding whether to stay invested in a suspended fund, or how to restructure after one, a financial adviser can look at your whole position; the different types of advice are explained in execution-only, advisory and discretionary services compared.