Woodford investors forced to accept large losses

THOUSANDS of investors in Neil Woodford’s fund have been forced to accept an “appalling” compensation scheme after the High Court backed a £230m repayment plan, according to campaigners.

Administrators to the fund, Link Fund Solutions (LFS), yesterday secured legal backing for a plan that will compensate investors who lost out in 2019.

However, campaigners argue that the deal is not good enough as they believe investors deserve more.

Mr Woodford’s fund collapsed after he was hit by a wave of redemptions, forcing the company to block people from taking their money out.

LFS was blamed for mismanaging the liquidity of the funds. It agreed with UK regulators to pay compensation to about 250,000 of Mr Woodford’s investors but LFS denies any wrongdoing.

More than 90pc of Mr Woodford’s investors voted for the deal when it was proposed last year. However, the scheme has faced criticism for trapping investors in it and removing their rights to further compensation.

The Financial Conduct Authority has backed the scheme as the best way for investors to get some money back.

About £183m will be paid into investors’ bank accounts in April, with the rest of the £230m set to be paid later. An appeal could derail the process, however. Investors have already received about 70p in the pound after the fund’s holdings were liquidated.

The scheme will add a few more pence in the pound. However, the value of their investments was already severely depressed when the fund was liquidated, so many have lost money.

The scheme’s critics say it prevents investors from launching further proceedings against Mr Woodford’s fund.

They say investors will be unable to complain to the Financial Ombudsman Service or the Financial Services Compensation Scheme about Link’s failures, which could have led to larger payouts.

“The scheme offers an appalling outcome for those who were trapped in Woodford’s flagship fund when it was suspended in June 2019,” said the Transparency Task Force’s Andy Agathangelou, a campaigner. “Most will get back between four and eight pence in the pound of their outstanding capital losses, with nothing for the returns forfeited over the past four-and-a-half years, let alone consequential losses, so much, much less than many have been led to believe by the FCA.

The All-Party Parliamentary Group on Fairer Financial Services also attacked the approval.

The group’s chairman, Bob Blackman MP, said: “It is unclear to me why the FCA backed the scheme, which does not appear to be in the interests of Woodford investors, consumers as a whole, or UK PLC.”