Fallen star: Neil Woodford’s £3.4billion Equity Income fund was suspended after its performance dipped
This Saturday will mark the fourth anniversary of the suspension of high-profile investment fund Woodford Equity Income, run by Neil Woodford. The fund was suspended because it didn’t have sufficient cash to meet the flood of redemption requests from investors as its performance dipped alarmingly.
It will be a far from happy occasion for the 300,000 plus investors who have been patiently waiting to be compensated for the losses they suffered as the £3.4 billion fund – awash with illiquid assets – was subsequently broken up and the holdings (most of them) sold off.
Although the Financial Conduct Authority has hardly covered itself in glory with its probe into the circumstances behind the fund’s shuttering, there is now a whiff of compensation on the horizon. But it’s far from certain. In a deal struck with Link Group – the owner of the business whose role was to ensure Neil Woodford stayed on the straight and narrow – compensation of up to £235 million could be paid to investors.
Yet it’s not a slam dunk, there are many hurdles to clear, and, as the FCA said last month, it will still leave Equity Income investors with losses of at least 23 pence in the pound.
One investor who has taken a keen interest in the Woodford debacle from day one told me last week that he would be amazed if anything like £235 million comes back to investors.
He also believes the regulator has not devoted enough resource to holding to account other organisations involved in the Woodford debacle – namely, investment platform Hargreaves Lansdown which recommended Equity Income as a best buy right up until it was suspended; and, of course, Neil Woodford and for that matter, the FCA itself.
(In the regulator’s defence, it has said its investigations into ‘other parties’ is continuing and that it will ‘consider any further failings which may have negatively impacted investors’.)
The investor says he is not holding his breath waiting for the FCA to conclude matters. His view is that someone like Dame Elizabeth Gloster should be brought in to sort out the mess. It was Dame Gloster who was asked to investigate the FCA’s regulation of investment bond issuer London Capital & Finance which collapsed in 2019 owing more than £240 million to 14,000 investors. Following her work, which took 18 months to complete, compensation was promptly paid to those caught up in the financial scandal.
Woodford investors deserve compensation soonest. They’ve waited far too long. If the FCA can’t get it over the line, a mover and a shaker like Dame Gloster should be asked to bring it about.
Customers come first in equity release reforms
THE equity release industry has fought hard to clean up its act and make itself consumer-friendly. It has made a good job of it, although the cleaning-up is far from finished.
Equity release is aimed at the over-55s who want to extract cash from the value of their home (asset rich, income poor). It involves the taking-out of a fixed-rate, interest-only mortgage, but unlike a conventional home loan, interest is rolled up into the debt rather than paid by the customer every month. The loan is cleared by the sale of the home when the planholder dies or goes into care – with the equity release provider guaranteeing to take the hit if there is any negative equity.
Though plans now allow partial payments of interest to be made – mitigating the impact of rolled-up interest increasing the size of the outstanding loan – equity release customers need particular looking after. The Equity Release Council, the industry’s trade association, acknowledges this. It has just reminded plan providers and equity release advisers of their lifetime responsibilities to customers.
With new consumer duty rules being introduced across the financial services industry by the City regulator, the council is keen to ensure its industry meets them. So it wants customers to be treated royally from the time they buy a plan through to when they die – with key information made available at key moments in their equity release journey. For example, this should happen when a loved one dies, leaving a surviving partner with a plan that maybe they don’t understand. I trust plan providers and advisers take on board what the council says. Customers must come first.
Hats off to scam-buster
Scam-buster: Doug Brodie
Hats off to Doug Brodie, founder of retirement income planning specialist Chancery Lane, who is earning himself a reputation for being a mighty fine scam-buster.
The latest scammers to be targeted by Brodie were those peddling an NHS five-year, fixed-rate bond paying six per cent interest.
Emailed from mail@nhsinvest.uk, the offer said investors could ‘earn a steady income stream while also contributing to the well-being of the UK population’.
Utter lies. Brodie immediately contacted the company that provided the fraudsters with the email address and within hours it had agreed to ‘terminate’ the client’s account.
If only the Financial Conduct Authority were as effective in making life difficult for fraudsters.
It’s a clean sweep from Newbury
IN recent weeks, I have detailed the steady withdrawal of banking facilities from my home town of Wokingham in Berkshire. In doing so, I have been unkind to one sturdy financial remainer: building society Newbury.
My apologies to Newbury – and thank you to local chimney sweep Paul Clarke (Sootbusters of Berkshire) for correcting my error.
While NatWest and Santander have already given up the ghost in thriving Wokingham – and Barclays is about to – Newbury continues to wave the flag.
Although it doesn’t offer a current account and won’t be paying windfalls any time soon, Newbury’s savings accounts are worth more than a cursory glance. They can be operated by post, online and via its branches located in Berkshire, Hampshire, Oxfordshire and Wiltshire.
A number of its accounts are eye-catching, especially the Senior Saver for over-55s which pays 3.05 per cent interest – and a Junior Isa, paying 3.65 per cent.
If Charlotte Hall and Justine Ransom, the society’s branch managers in Wokingham, are anything to go by, you will also be greeted with a friendly smile too when using its services.
Paul and his wife are recent Newbury converts and they have been impressed with its service. ‘We even get passbooks,’ he exclaimed, ‘and the society is really involved in the community.’
So, a big shout-out to all those low-key building societies up and down the country which serve with distinction. And if you live in Berkshire and need your chimney sweeping, Paul is your man (sootbusters.org.uk).
Monthly savings usually good for financial health
I’m a big advocate of monthly investing. It’s a great way to fund a pension or a tax-friendly Individual Savings Account without denuding your finances. Investment specialist Fidelity International has just produced some numbers that prove the worth of this gently-gently investment approach.
Assuming someone invests £69 a month into an Isa which enjoys an annual investment return of 3.9 per cent, Fidelity says it would be worth £25,106 at the end of 20 years. Along the way, they would have made contributions totalling £16,560. Of course, the numbers are illustrative but they do confirm that monthly investing is usually good for your financial health. Gently does it.
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