'I could lose £100K despite Woodford redress scheme' – Today news

People who lost tens of thousands of pounds when a star stockpicker’s investment fund collapsed say they have been let down by the UK’s financial regulator and are calling on MPs to investigate.

Around 300,000 people lost money when Woodford Equity Income Fund collapsed in 2019.

In 2023, the Financial Conduct Authority (FCA) announced a “redress scheme” that it said would allow investors to recover around 77p in the pound.

But some investors say that figure was misleading, and the scheme coming into force locked them out of other consumer protections.

The FCA says the scheme offers the “quickest and best chance” of getting a “better outcome than might be achieved by other means”.

When Ian Duffield and his wife Linda, from Manchester, put £234,000 of their pension savings into Neil Woodford’s fund, they thought most of their money would be protected.

Mr Woodford came with a stellar reputation, and the fund advertised that it was protected under the Financial Services Compensation Scheme (FSCS), which pays compensation when a financial firm fails.

After its collapse, the Duffields recovered some of their money when the fund’s assets were sold off, but this still left them with a loss of about £107,000.

Ian said when the redress scheme was announced, they initially thought they would get most of that remaining sum back.

“When I first heard it, I thought… I’ll end up losing, maybe £30-35K between us, which is not great, but in the scheme of things it would have been OK, a bit of a sigh of relief”.

On reading the detail, he realised that was not the case, as the scheme took into account the money they had already received.

He actually got £7,600, leaving him and his wife with a total loss of nearly £100,000.

“It has affected our lives. We had to not take holidays for a few years…but we’re fortunate,” he says.

“I know people who’ve lost far lesser sums, but the impact has been much greater”.

Investors in the fund voted to accept the scheme in December 2023, meaning they are no longer able to access the Financial Services Compensation Scheme.

Paul King from Kingston-upon-Thames works in IT and invested just under £50,000 in the Woodford fund to help save for his retirement.

He said he had taken comfort in the fact that it appeared to be protected.

“At the end of the day, I’m just a consumer. You do your best to provision for the future and you put a lot of weight behind the FSCS,” he says.

“I didn’t anticipate that if things went wrong that we would be shafted, to put it bluntly”.

“I feel I’ve got more protection if I buy a faulty pair of shoes costing £50 than if the regulator of this country fails and I lose £50,000”.

A group of MPs and peers, the All-Party Parliamentary Group (APPG) for Investment Fraud and Fairer Financial Services, has now written to the Commons Treasury committee to ask for them to conduct an inquiry into how the FCA handled the fund’s collapse, including how it set up the redress scheme.

In a report to be published on Tuesday, the APPG will say the FCA failed to properly communicate that its “77p in the pound” figure only related to some of the assets in the fund, rather than in its entirety.

“Only a minute minority of investors were sufficiently engaged to even begin to understand the nuances and intricacies of what was taking place,” they will argue.

The Woodford Equity Income Fund collapsed in 2019 after a number of investors withdrew their money over concerns about the investments being made.

The redress scheme was proposed by Link Fund Solutions (LFS), the former authorised corporate director of the fund.

It came after the FCA investigated and three investor groups filed lawsuits over the way LFS had managed the fund.

A FCA spokesperson said the size of the redress scheme did not reflect investment losses due to the underperformance of the fund.

“Instead, it covers the losses that flowed from Link Fund Solutions’ conduct, which we consider fell below the required standards,” they added.

“The scheme offered investors the quickest and best chance to obtain a better outcome than might be achieved by any other means. The scheme was approved by more than 90% of investors.”

Almost 94% of investors backed the compensation scheme in a vote in December 2023, although only 54,000 voted. It was approved by a High Court judge last year.