JEFF PRESTRIDGE: Four years on and Woodford investors still left in limbo

This Saturday marks the fourth anniversary of the suspension of high-profile investment fund Woodford Equity Income, led by Neil Woodford. The fund was suspended because it did not have sufficient liquidity to meet the deluge of investor redemptions as performance slipped alarmingly.

It will be a far from happy event for the more than 300,000 investors who patiently waited to be compensated for the losses incurred when the £3.4bn fund – overrun with illiquid assets – was subsequently split up and the holdings (the most of them) sold out.

While the Financial Conduct Authority has barely shrouded itself in glory with its investigation into the circumstances behind the fund’s closure, there is now a hint of compensation on the horizon. But it is far from certain. A deal with Link Group – the owner of the company whose role was to ensure Neil Woodford stayed on the right track – could see a fee of up to £235m paid to investors.

Still, 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.

An investor who has taken a keen interest in the Woodford debacle from day one told me last week that he would be surprised to see something like £235m returned to investors.

He also believes the regulator did not devote enough resources to holding accountable other organizations involved in the Woodford debacle, namely investment platform Hargreaves Lansdown, which recommended Equity Income as a best buy until it was suspended; and of course Neil Woodford and for that matter the FCA itself.

(In the regulator’s defense, it has said its investigations into “other parties” are continuing and that it will “consider any further deficiencies that could negatively impact investors.”)

The investor says he is not holding his breath waiting for the FCA to wrap things up. His opinion 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 regulation of investment bond issuer London Capital & Finance, which collapsed in 2019, owing more than £240 million to 14,000 investors. After her work, which took 18 months, compensation was promptly paid to those involved in the financial scandal.

Woodford investors earn compensation as soon as possible. They’ve waited way too long. If the FCA can’t get it over the line, a mover and shaker like Dame Gloster should be asked to make it happen.

Customers come first in equity release reforms

THE stock release industry has been fighting hard to clean up its act and make itself consumer-friendly. It has done well, although the cleanup is far from finished.

Equity release is aimed at people over 55 who want to make money from the value of their home (rich assets, poor income). It involves taking out a fixed rate mortgage, but unlike a conventional home loan, the interest is incorporated into the debt rather than being paid each month by the customer. The loan is settled by the sale of the house when the plan holder dies or goes into care — with the equity release provider guaranteeing to take the hit if there is negative equity.

While the plans now allow partial interest payments to be made — limiting the impact of accrued interest and increasing the size of the loan outstanding — equity release clients require particular attention. The Equity Release Council, the trade association of the sector, recognizes this. It just reminded plan providers and equity release advisors of their lifetime responsibilities to clients.

With the introduction of new rules for consumer rights in financial services by the city regulator, the municipality wants to ensure that the sector complies. So it wants customers to be treated like royalty from the moment they buy a plan to when they pass away – with key information made available at key moments in their journey to share release. This should happen, for example, when a loved one passes away, leaving a surviving partner with a plan they may not understand. I trust that plan providers and advisers will accept what the municipality says. Customers must come first.

Hats off to scammers

Hats off to Doug Brodie, founder of the retirement planning specialist Chancery Lane, who is earning himself a reputation as a great con artist.

The latest scammers to be targeted by Brodie were those who loaned out a five-year NHS bond with a five-year fixed rate and paid six per cent interest.

The offer, emailed from mail@nhsinvest.uk, stated that investors could ‘earn a steady stream of income while contributing to the well-being of the British people’.

Complete lies. Brodie immediately contacted the company that provided the fraudsters with the email address, and within hours it had agreed to “terminate” the customer’s account.

If only the Financial Conduct Authority was so effective at making fraudsters difficult.

It’s a clean sweep from Newbury

IN recent weeks I have described the steady withdrawal of banking facilities from my Berkshire hometown of Wokingham. In addition, I have been unkind to one solid financial remnant: the construction company Newbury.

My apologies to Newbury – and thanks to local chimney sweep Paul Clarke (Sootbusters of Berkshire) for correcting my mistake.

While NatWest and Santander have already given up ghost in thriving Wokingham – and Barclays is about to do so – Newbury continues to wave the flag.

While it doesn’t offer a current account and won’t pay windfalls anytime soon, Newbury’s savings accounts are worth more than a cursory glance. They can be administered by mail, online and through the branches in Berkshire, Hampshire, Oxfordshire and Wiltshire.

A number of bills stand out, especially the Senior Saver for over 55s that pays 3.05 percent interest — and a Junior Isa that pays 3.65 percent.

If Charlotte Hall and Justine Ransom, the association’s branch managers in Wokingham, are anything to go by, you’ll also be greeted with a friendly smile when you use her services.

Paul and his wife are new converts to Newbury and they are impressed with the service. “We even get passbooks,” he exclaimed, “and the association is really involved in the community.”

So a big shout out to all those low key building societies across the country serving with distinction. And if you live in Berkshire and need your chimney swept, then Paul is your man (sootbusters.org.uk).

Monthly savings are usually good for financial health

I am a big proponent of monthly investing. It’s a great way to fund a retirement or tax-friendly Individual Savings Account without straining your finances. Investment specialist Fidelity International has just presented some numbers that prove the value of this gentle investment approach.

Assuming someone invests £69 a month in an Isa enjoying an annual return on investment of 3.9 per cent, Fidelity would be worth £25,106 after 20 years. Along the way, they are said to have contributed a total of £16,560. Of course the figures are illustrative, but they do confirm that monthly investing is generally good for your financial health. Do it carefully.