The Financial Conduct Authority has put forward an FCA 90-day illiquid fund notice requirement that would fundamentally change how retail investors access their money in property and other hard-to-sell asset funds, under consultation paper CP26/35. For anyone holding such funds inside a SIPP or general investment account, understanding the proposal’s scope and timeline is more pressing than it might first appear.
What the FCA is proposing
The rules, as drafted, would apply to non-UCITS retail schemes (NURS) where at least 50% of assets are invested in inherently illiquid holdings. Those funds would be required to offer redemptions no more than once a month, and investors would need to give a minimum 90-day notice period before withdrawing. The FCA frames the move as a way to reduce suspension risk and to support investment into private markets more broadly.
The practical effect is a significant shift in the liquidity terms that many retail investors have taken for granted. Property funds in particular have a history of gating during periods of market stress, most visibly during the uncertainty that followed the Brexit vote and again during the early stages of the pandemic. The proposed FCA 90-day illiquid fund notice period is designed to make that mismatch between daily dealing and illiquid assets a structural feature, rather than an emergency measure.
According to Money Marketing, the FCA estimates the proposals would affect 17 funds with combined assets of around £7.22bn. That is a relatively concentrated universe, but it covers a meaningful slice of the retail property and illiquid-asset fund market.
Portfolio implications and the drawdown risk question
For investors in or approaching retirement, the notice period introduces a layer of planning that did not previously exist. Someone drawing income from a SIPP who holds one of these funds could find that a decision to reduce allocation takes three months to execute. In a falling market, that delay compounds sequence-of-returns risk in a way that daily-dealing funds do not.
The counterargument, from an asset-allocation perspective, is that illiquid funds should never have been used as a liquid sleeve of a portfolio in the first place. If an investor is holding a property fund for long-term diversification over a ten-year-plus horizon, a 90-day notice requirement changes administration rather than strategy. The issue arises primarily when such funds have been treated as near-cash or short-term tactical holdings, which was never an appropriate use.
That said, retirees in drawdown typically need flexibility across their whole portfolio. Any reduction in the liquidity of one component increases the burden on others to meet short-term income needs. A balanced approach would be to review whether illiquid fund holdings currently serve a defined long-term role, and if not, to consider whether a transition out ahead of any rule change is appropriate.
Separately, this week’s survey data from AJ Bell illustrates how much regulatory and fiscal uncertainty is already weighing on planning decisions. A survey of 233 financial advisers attending AJ Bell’s Great Wrapper Reset Tour in September found that 87% cited frozen inheritance tax thresholds and the inclusion of unused pensions in IHT from April 2027 as the biggest pain points for clients. Some 47% said clients were concerned about a potential reduction in the maximum pension tax-free cash lump sum. Against that backdrop, adding a liquidity constraint to a portion of the portfolio is one more variable for advisers and self-directed investors to account for.
The FCA 90-day illiquid fund notice consultation closes on 11 December 2026, giving firms and individual investors time to submit responses. Investors with current holdings in affected funds, or those considering adding illiquid-asset exposure, should review the proposals in CP26/35 and consider whether their current allocation remains consistent with their income needs and time horizon before that date.
