AIG Life closes £5.7bn enhanced fund, reopens standard fund

AIG Life is closing its enhanced fund following a fortnight of turmoil at the US-based insurer, which culminated in an $85 billion bail-out from the US government last week.

The company's standard fund, which closed to redemptions last week alongside the enhanced fund, is set to re-open.

Meanwhile, members of the enhanced fund will automatically be given the option of having 50% of their original policy value returned on 6 October, but they face tough decisions over the fate of the remaining half of their investment.

If they want to access their money as soon as possible, the tied-up half of the investment will be transferred to the standard fund where it can be accessed from 15 December. The value of the funds being withdrawn will be reduced to take into account volatile market conditions.

Policyholders who choose to stick with the AIG Life enhanced fund will have the tied-up portion of their investments transferred to a newly created protected fund. The fund will guarantee to return at least the value of the policy at 15 December to members who remain invested until its closure on 1 July 2012.

The £5.7 billion enhanced fund was designed for high-net-worth investors and was sold through bancassurers, the company said. It recommended that investors seek advice if considering redemptions.