Investors in Keydata products based on Lifemark ‘death bonds’ are set to receive a further distribution from the underlying bonds, as total returns on the original investment close in on the amount originally predicted by trustee PricewaterhouseCoopers.
The distribution is worth around 2.5 per cent of the nominal value of the bonds. PricewaterhouseCoopers has maintained since taking over as trustee that final payout from the bonds would be equal to around 15 per cent.
Keydata had originally distributed $605m (£365m) worth of Lifemark bonds.
The payout was confirmed in a letter to registered bondholders and announced by the Financial Services Compensation Scheme in an announcement this morning (27 March).
The FSCS also announced that it has finally paid out to all affected investors the top-up compensation demanded by a High Court ruling last year to ensure early-settling investors did not lose out compared to others that benefitted from subsequent bond distributions.
Following a court order FSCS announced in September it would provide top-up payments to compensate early-settling investors and to counter a disproportionate hit on compensation sums from £32m worth of scheme administration fees.
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”.
Top-up payments were required to correct disparities in redress caused by its previous methodology, which based payments on the ‘compensatable amount’ of any claim.
Due to the way a compensation cap was applied - 100 per cent on the first £30,000, and then 90 per cent of the remainder up to a hard cap of £48,000 - this resulted in investors that settled later benefiting from a distribution that those who settled early did not.
A hypothetical investor with a £100,000 nominal claim would, if they promptly accepted the FSCS offer, have received £48,000, while if they waited they would have received an £8,075 distribution and, due to the way the cap was applied, the same £48,000 payout.
This is because despite their nominal claim value dropping to £91,925, the calculation would still have resulted in them receiving a full payout up to the hard cap.
