The Financial Services Compensation Scheme has announced it will this week begin making additional compensation payments to Lifemark investors who may have been better off not accepting help from the FSCS in the first place.
Under the regulator’s compensation handbook rules, the scheme must ensure “a claimant will not suffer disadvantage arising solely from his prompt acceptance of the FSCS’s offer of compensation compared with what might have been the position had he delayed acceptance or had his claims not been subrogated”.
In a statement the FSCS said Lifemark trustees had made two distributions in May and August 2013 totalling 8.5 per cent of the total investment into the life settlement bonds that had been distributed through Keydata, but that this amount had not been fully passed on to claimants.
It added that approximately 16,000 Lifemark investors have been compensated with a combined total of £228m. This is £32m lower than the £260m value of claims from these investors as assessed by the FSCS, before the scheme deducted “reasonable costs of recovery and distribution”. Keydata had originally distributed $605m worth of Lifemark bonds.
FSCS said it would hand back up to 6.53 per cent of a claimants original investment value. Claimants whose claims exceeded the full £50,000 level of compensation plus this amount - around £53,500 - will get this percentage payout in full, while those with claims above £30,000 but below £53,500 will get a proportionate payment.
In April, the FSCS admitted that only 10 per cent of the money invested in Lifemark-backed Keydata products had been recouped following a £6.5m loan in 2011 to Lifemark administrator KPMG in an effort to salvage more capital.
Although the FSCS said its loan had been repayed and had helped fund some recoveries, it warned that the recoveries would “fall some way short” of the original investment value. However, it did argue that the amounts recovered would be substantially higher than they would have been if the FSCS had not stepped in.
