Link to make next payout to Woodford investors in early 2024

Investors stuck in the Woodford Equity Income Fund are likely to get a payment in the first quarter of 2024.

The fund administrator gave the update in a letter to investors published today (7 September).

Link Fund Solutions had previously agreed to a scheme arrangement where it will compensate investors.

The reserve amount has been set at £50m but will be reviewed by Link and the supervisors of the scheme.

Link currently estimates that the total amount of the settlement fund will be up to
£230m.

And that the first distribution from the settlement fund will be between
£180m and £200m.

AJ Bell head of investment partnerships Ryan Hughes said: “Investors will be pleased to see further details regarding the redress scheme on the Woodford Equity Income fund which sets out the potential amount available for distribution and the timeframe around this.

“This is an important next step for investors looking to be compensated for the failure of the fund, with c£230m being earmarked as available for investors who held the fund at the point of suspension on 3 June 2019.”

He added while this remains subject to the successful completion of the sale of the Link Fund Solutions business and the approval of the scheme by investors.

The communication of additional detail should prove to be a strong indicator that the sale is close to completion.

Investors will now need to think carefully about how they wish to vote on the proposed scheme, which will happen towards the end of the year.

He continued: “Should these two key steps be successfully completed, investors should get a first tranche of payment in the first quarter of 2024, which looks like it will make up the bulk of the redress.

“However, there will likely be a further payment or payments to a much lesser degree at some point later in 2024.

“As a result, the light at the end of the tunnel for investors is coming much closer into view, but there is still a high probability that this will not be fully completed until at least the middle of 2024, at which point five years will have passed since the suspension.

“Investors have been hugely patient in this long, drawn out process but hopefully they can genuinely see an end is in sight.”

However, lawyers representing thousands of investors trapped in the fund formerly run by manager Neil Woodford, have criticised the compensation scheme.

They have accused the FCA’s guidance on the proposed settlement scheme as containing a ‘huge black hole’ which makes it impossible for victims to make an informed decision. 

Law firm Harcus Parker says that it believes that the vast majority of its clients would be better off claiming a refund through the Financial Services Compensation Scheme (FSCS). 

Daniel Kerrigan, a partner at Harcus Parker which represents 7,500 Woodford fund clients said: “I cannot understand how the FCA allows this guidance to be sent to investors without first establishing whether these victims of the fund have a right to make a claim from the FSCS. 

“It seems to me that this letter is trying to sweep the FSCS compensation issue under the carpet but instead its just left a huge black hole.

“If investors don’t know if they can claim from the FSCS it makes it impossible for them to make an informed decision. We have serious concerns that, as Link has suggested they will, investors will lose their right to claim from the FSCS if the scheme is approved.” 

He added: “We have written to the FSCS to ask them to determine whether investors will have a right to compensation, which we firmly believe that they should, but have not heard back. 

“Nearly all of our clients will have investments under the £85,000 compensation threshold so would be able to be fully refunded.   

“There’s a wider issue here of the FSCS existing to give confidence to the market if things go badly wrong. I question how the FCA can act as a negotiator and a regulator at the same time.”