Save, make, understand money

Experienced Investor

Majority of failed Woodford investors vote for compensation scheme

Majority of failed Woodford investors vote for compensation scheme
Paloma Kubiak
Written By:
Paloma Kubiak

An overwhelming majority of trapped Woodford investors have voted in favour of the scheme of arrangement, which could see them share up to £200m in compensation in Q1 2024.

More than 54,000 creditors turned out for the meeting, with 93.7% voting in favour of the redress scheme, representing 96.1% in value.

The scheme required the support of a majority in number, representing at least 75% in value, showing that the votes garnered smashed through the necessary threshold.

Just 6.3% voted against the scheme, representing a value of 3.9%.

However, the votes still need to be verified, with final numbers released before the sanction hearing (see timeline of events below).

But given the strong show of support, Link Fund Solutions Limited (LFSL) confirmed it intends to seek an order from the court sanctioning the scheme. If approved, an initial payment of between £183.5m and £200m is expected to be made during the first quarter of 2024 – irrespective of whether creditors voted or not.

In total, the ‘settlement fund’ (compensation scheme) is set at up to £230m which includes all of LFSL’s available assets and a voluntary contribution of £60m from LFSL’s parent company.

A spokesperson for LFSL said: “With this vote, investors have demonstrated their strong support for the scheme. We actively sought to reach as many scheme creditors as possible to ensure they had their say and are extremely grateful to all investors who made their voices heard.

“This is an important step for the scheme, and the establishment of the settlement fund, which LFSL has always believed is the best option available for investors as it materially enhances the amount of redress available from LFSL and provides the fastest route for redress possible.”

What now for Woodford investors?

It’s been four and a half years since former star fund manager Neil Woodford was forced to suspend his flagship fund – Woodford Equity Income fund (WEIF) – on 3 June 2019 following a surge in redemption requests which couldn’t be readily met after a period of poor performance.

In October 2019, the fund’s administrators confirmed the £3bn fund would be wound up with cash returned to investors “as soon as possible”.

To date, £2.56bn has already been distributed from the £3.6bn value of the fund.

With the latest update, it means failed investors will get back around 80% of the fund value on suspension.

“While there will no doubt be some who feel this scheme doesn’t compensate them sufficiently for their losses, others will feel that getting back around 80% of the fund value on suspension will be more than they could have hoped for when the fund initially suspended”, according to Ryan Hughes, interim AJ Bell investments managing director.

It’s been a long process to get to this point, and a number of requirements have had to be met, including the sale of Link Group’s Fund Solutions’ business to the Waystone Group which completed in October 2023.

But now, here are the next steps and key dates to bear in mind:

  • 18 January 2024 – The sanction hearing. As scheme creditors have voted in favour of the Scheme, LFSL will ask the court to approve the scheme at this court hearing.
  • 9am 9 February 2024 – expected effective time. The scheme will become fully effective on this date if the court orders the sanction of the scheme after the sanction hearing on 18 January 2024 and no appeal of that decision is made within 21 days of the sanction order being made.
  • By 31 March 2024 – The first payments from the settlement fund, estimated to be between £183.5m and £200m, are expected to be made as soon as the first quarter of 2024 if the scheme is approved.

Will I definitely get more of my money back?

While a majority voted in favour of the scheme, it still needs the court approval to go ahead and before then, scheme creditors or other persons can make submissions at the sanction hearing.

If the scheme does becomes effective, all scheme creditors, even those who voted against the scheme or who didn’t vote at all, will be affected by it. Once implemented, the settlement fund will be paid to the WEIF, which will distribute the cash based on the number and class of shares held.

As such, scheme creditors will no longer be able to make any claim against LFSL, Link Group and other entities and persons in the Link Group of companies.

But scheme creditors will be able to bring claims against other parties.

Separate claim handled by RGL Group

Indeed, in October 2022, RGL Group filed a group action claim against investment platform Hargreaves Lansdown Asset Management and Link Fund Solutions.

It is now only pursuing the Hargreaves Lansdown claim and said it is “the only claim seeking to recover losses suffered by investors as a result of the collapse of the WEIF in June 2019.”

It is acting for around 3,000 investors but an estimated 300,000 investors were left stranded in the WEIF at suspension. RGL Group is now urging investors who were previously registered with other claimant groups such as Harcus Parker or Leigh Day for claims against Link to join the RGL Group claim, provided they invested in the WEIF via the Hargreaves Lansdown platform.

Currently, there is no deadline for investors to come forward. The link to register a claim is via the Woodford Litigation link.