I regret investing £37,000 from my pension into the Woodford Equity Income Fund through Phoenix Wealth.

The fund’s collapse resulted in substantial financial losses for me, as well as for thousands of others.

Link Fund Solutions, which the Financial Conduct Authority (FCA) found had failed to properly manage the fund’s liquidity, accepted responsibility for this oversight and agreed to offer compensation without going through legal proceedings.

Despite numerous attempts to reach out to Phoenix Wealth, I was informed that due to my pension plan being closed, I was last in line for any compensation.

Initially, I was promised a compensation of £3,696, equating to about 20% of my losses. However, I was subsequently informed that I was not eligible for any compensation at all. I’m left wondering what is happening and if I will ever recover my money. — S.M.

The FCA announced it would fine Neil Woodford £6million and Woodford Investment Management £40million

Harvey Dorset from This is Money responds: I’m truly sorry to learn about the significant losses you’ve endured due to the mismanagement of the Woodford Equity Income Fund (WEIF).

Woodford came unstuck in 2019, when a rush of investors pulling their cash out of his poor performing flagship fund meant it became a forced seller of the shares it held. This left it holding too much in illiquid assets – those that are hard to sell – such as smaller and non-stock market listed companies.

A large request to sell out by Kent County Council, in June 2019, combined with other investors making withdrawals, led to trading in Woodford Equity Income being suspended by Link Fund Solutions, its authorised corporate director.

This was done to present a fire sale of assets at distressed prices but locked just over £3.5billion belonging to 300,000 investors in the fund. 

In October 2019, Link decided that reopening the fund would be impossible and a plan was drawn up to sell assets and return some money to investors. 

Investigations followed and in 2024 the Woodford Equity Income Fund Redress Scheme was set up, with a plan to return £230million to investors on top of money they had already had back from assets sold off. First payments from a £186million chunk of that were made in March 2024.

In August this year, the Financial Conduct Authority announced that it would fine Neil Woodford £6million and Woodford Investment Management £40million.

It said: ‘The FCA has concluded that between July 2018 and June 2019 WIM and Mr Woodford made unreasonable and inappropriate investment decisions. They disproportionately sold more liquid investments (those that are easier to sell) and bought less liquid ones over this period. 

‘This meant that at the time of suspension only 8 per cent of the investments held by WEIF could be sold within 7 days. Under rules in place at the time, investors should have been able to access their funds within 4 days.

‘WIM and Mr Woodford did not react appropriately as the fund’s value declined, its liquidity worsened and more investors withdrew their money. This disadvantaged investors who remained in the fund, compared to those who had withdrawn their investment before the fund was suspended.’

While the big picture is one of widespread pain for investors, this doesn’t soften the blow for you.

As you mention in your letter, the fact that you had already closed your Phoenix Wealth pension plan meant that you were ‘at the back of the queue’ when it came to compensation.

Still, you say the messaging from Phoenix has been mixed, and you were left unsure whether you were going to receive compensation or not.

It isn’t Phoenix Wealth itself that is paying out the compensation sums. It passes them on from Link Fund Solutions to investors who held investments in WEIF via the Phoenix Wealth platform.

I’m pleased to say that after contacting Phoenix Wealth, the company said you are eligible to receive £2,296.21 in compensation for your losses, and that this will be administered by Link Fund Solutions.

Phoenix Wealth said: ‘S.M had a Phoenix Wealth Personal Pension Plan, which provided access to a wide range of funds, including the LF Woodford Equity Income Fund. Phoenix Wealth is the product provider, not the fund manager of the underlying fund, to which compensation was due.’

‘Compensation is being administered by Link Fund Solutions Limited who are the authorised corporate director of the fund and proposed the Scheme of Arrangement, which was approved by the High Court and Phoenix passes on all payments to customers when received.’

‘We’ve received confirmation that S.M is eligible for a payment of £2,296.21, which is being paid.’

‘We remain focused on ensuring compensation payments are passed on promptly once confirmed.’

It might not come close to the £37,000 you had stuck as part of Neil Woodford’s fund mismanagement, but it hopefully comes as a welcome relief after a six-year long saga.

Phoenix said the previous higher compensation figure that you were given was likely an earlier estimate on what you might receive, rather than a confirmation, and added that the final compensation figure was determined by the fund managers based on eligibility criteria and distribution methodology.

Can people still get compensation from the Woodford fund?

The Woodford Equity Income Fund redress scheme first become fully effective in March 2024, with many investors having already been paid.

However, plenty of those who lost out could still be waiting for their payouts.

If you are eligible for a compensation payment, then you should receive this from Link Fund Solutions. 

The FCA says no action is required in order to receive compensation that you are due.

Currently, £186million has been paid out to Woodford investors, out of a possible £230million, with the remainder being held on reserve for contingent liabilities.

This means that the reserve funds could eventually be paid out to investors, but this is by no means guaranteed.

The next review date for the redress scheme is in March 2026.

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