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Advisers and investors in line for Keydata payout

FSCS-office-alternative-2013

Advisers, investors and fund managers are in line for a payout from the Financial Services Compensation Scheme following recoveries made from the Keydata Lifemark investment vehicle.

The FSCS has been pursuing recoveries from the Lifemark plans and has announced an initial distribution of 7.5p in the pound will be paid, starting next month.

Further distributions are expected next year which will take total returns to between 12 and 15 per cent of the money invested.

The FSCS has refused to disclose the total amount of Lifemark recoveries it has secured so far and how much advisers, investors and fund managers are each likely to receive.

In its plan and budget in February, the FSCS said it expects total Keydata recoveries of around £75m over the next two to three years.

Keydata invested customers’ money in around $605m of bonds issued by Lifemark, which in turn invested in US life settlement policies.

Keydata was put into administration in June 2009 and Lifemark was placed into “provisional administration” in November 2009.

To date, the FSCS has accepted around 16,000 claims from investors in the Lifemark plans and paid compensation of around £228m.

The FSCS has set out how it will allocate recoveries, which will see advisers receive a refund of some of their FSCS levies, as the cost of pursuing recoveries was allocated to the investment adviser sub-class.

Keydata investors whose FSCS claims were capped at £48,000 will also receive their share of recoveries. The FSCS has devised a formula to calculate payments for Keydata investors who have been left worse off by accepting FSCS compensation early rather than waiting for future recoveries.

The industry was hit with a £326m interim FSCS levy in January 2011, mainly to cover the cost of compensating Keydata investors.

Advisers had to pay £93m towards these costs while fund managers paid £233m.

The FSCS says where recoveries relate to compensation paid from the 2010/11 interim levy, net recoveries will go to fund managers first as fund managers were cross-subsidising advisers’ levies.

It aims to make initial distributions to investors by the end of June and distributions to advisers and fund managers by the end of October.

Yellowtail Financial Planning managing director Dennis Hall says: “This is a better position than we were in a couple of years ago and it is good to see the FSCS is shelling out. But whether it is 7.5p in the pound or 15p, this is still a drop in the ocean.”

The FSCS is separately pursuing advisers who recommended Keydata products via ongoing legal proceedings.

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Comments

There are 4 comments at the moment, we would love to hear your opinion too.

  1. I wonder if any monies received will be accepted by other institutions without jumping through multiple hoops as being ‘tax-free’, because it was when it was initially invested.

  2. So the FSCS won’t disclose how much they recovered. I’ll bet they won’t.

    So of every £100 the best estimate is £15 returned. It is therefore not too difficult to make a stab at how much they recovered:

    £100- £15 = £85
    So let’s say 25% is lost.
    That leaves £60 (total recovered about £75)
    £20 for FSCS costs
    £20 for the liquidators
    £20 for the lawyers.

    So 60% went in expenses. Dear FSCS please prove me wrong.

  3. Alistair Paterson 22nd May 2013 at 10:28 am

    Harry,

    Don’t be so unkind. They have all their final salary scheme benefits and congratulatory retirement packages to pay for.

    They’re not a charity, you know.

  4. Harry is completely wrong on this.
    The Trustee who now has custody of the Lifemark assets has reported he expects to finally realise 12 – 15% of the amount originally invested. I believe the FSCS is going to distribute any amounts investors are due them for nothing.
    It always amazes that IFA’s moaning about Keydata issues generally have crucial aspects of the saga completely wrong.

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