The changes apply to the UK Equity Income and Global Equity Income sectors and will mean funds will not be removed for failing to meet yield requirements.

The IA says it is making the move “to ensure that in light of Covid-19 they can continue to function effectively in the best interests of savers and investors.”

The IA’s UK Equity Income sector has 87 funds and Global Equity Income 57 funds. They are often a core holding in investors’ portfolios.

Since the lockdown many companies have reviewed their dividends. Some have suspended or postponed payments which is affecting equity income funds, said the IA.

The change of dividend policy means some funds may be unable to meet the requirements to be included in the IA equity income sectors, including two tests based on the annual and three year rolling average yields of the FTSE All Share and the MSCI World indices.

The IA says by suspending the yield requirements fund managers can focus on long-term outcomes instead of making sudden changes to funds.

With immediate effect:     

• The enforcement of the annual 90% yield threshold test will be suspended for 12 months for funds with a year end after the end of February 2020
• The enforcement of the three year test will be suspended
• Monthly monitoring data will continue to be published publicly on the IA’s website

Jonathan Lipkin, director of policy, strategy and research at the Investment Association, said: “The measures we’ve introduced today will 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.”

Adrian Lowcock, head of personal investing at platform Willis Owen, said: "This is a sensible move by the IA. With so many companies unable to trade because of the lockdown, and many not even reporting results - let alone dividends - scrapping this requirement will at least remove an unnecessary hurdle for fund managers.”