The Investment Association (IA) has suspended the yield requirements for both its UK equity income and global equity income sectors due to the dividend cuts, cancellations and deferments from companies caused by the coronavirus crisis.
IA rules currently require funds in their equity income sectors to achieve an historic yield on the distributable income in excess of 100% of the UK-focused FTSE All-Share or global-focused MSCI World at each fund's year-end on a three-year rolling basis, and 90% on an annual basis.
Funds not meeting these requirements are usually thrown out of the sectors, with a number of historic examples having already been dumped.
However, dividend payments are currently under pressure as listed companies around the world struggle with Covid-19-related lockdown scenarios, with some funds likely to become unable to meet the requirements to be included in the two sectors.
As a result, the trade body has said it will suspend these requirements for the next year in order to prevent any short-term disruptions to these sectors.
The IA said the enforcement of the 90% yield threshold test will be suspended for all funds with a year-end after the end of February 2020 for 12 months. Any fund currently in the sectors that does not meet this yield test will not not be automatically removed.
The enforcement of the three-year rolling test will also be suspended, with the IA planning to review the application of the test as stockmarkets settle and the outlook clears.
The IA said it would continue to publish yield data for all funds in both sectors, "to ensure ongoing transparency".
Director of policy, strategy and research at the IA Jonathan Lipkin said the measures would "continue to provide savers with transparency on fund performance, while helping prevent short-term disruption to the equity income sectors, which are particularly affected by the economic consequences of COVID-19".