Keydata in administration

pete80

dunstonh wrote: »

NDFA and a few others have come out and said they are interested in buying keydata.

Also, this announcement was just made by Skandia....(This doesnt relate to the keydata plans directly but keydata did have their hands in a number of pots.)
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News is coming out in dribs and drabs but the fact there are at least three companies looking at buying Keydata within 24 hours of the problem coming to light has to be a good thing.

If memory serves me correctly, didn't NDF Administration or some former version of NDF have problems with their structured products back in the late 90's. Then again when Lehman Brothers failed in 2008, there was talk about some investors including NDFA again, only getting back 9 cents or 11 cents on the dollar.

AIG also backed many of these structured products (not sure if they covered UK plans) and AIG were hanging on by a thread for a while.

These structured products tend to look attractive in depressed markets with their capital protection guarantee but as we are seeing over the years too many investors are getting let down and the returns are not always as good as are expected due to the averaging out in the final 6 or 12 months.

Barclays had one on offer back in April offering 4 times the return on one of the FTSE indices up to a maximum of 100% over the period of 5 years or so, but these structured products offer no dividends so in my opinion they are mutton dressed as lamb.

I hope as in your last paragraph that Keydata do get bought out and no one loses their capital or income payments, there seem to be so many pensioners who have taken these out to supplement their pensions.

Concerned09

Anyone holding a Keydata Secure Income Bond 1, 2 or 3 should make sure that they look at the Victims of Keydata website.
www dot keydatavictims dot ning dot com

kt

Now that problems seem to be getting worse at Keydata and my husband and I have not received any income for the last three months is there anyway that we can take up a claim with the FSCS. I have looked at the website listed above but it looks like that applies only to Secure Income Bonds 1,2 and 3. Our Income Bond was number 6. We have heard from the FSCS re ISA status and we had to fill in a form which now is supposed to give us tax free income. As we are not receiving any income at present this seems irrelevant. I am perhaps more concerned with the main sum of money invested in these bonds and wonder if anyone knows if we are likely to get this money back. We are extremely worried by this situation and it seems to be going from bad to worse. Can we put in a compensation claim or is it too early we have a couple of years left yet?

ewan_husahmi

Well the plot thickens at Keydata...
Here we were thinking our investment was safeguarded despite Keydata going into administration. Not true! As soon as we tried to touch it, KD's administrators told us that the products that the money is tied up are in effect worthless.

Nice of them not to write and tell us that.

When we asked about the withdrawal process, they told us that being a 7-year plan there is no facility for early withdrawal. Not true! I still have it in black and white from the original brochure.

They tried to tell me that because KD is bankrupt, there is no legal claim to be made on our investment - not true! Investors' funds were seperated from the bank's own funds. It was the bank that was bankrupt, the investors' assets were supposed to be sound. The only claim the bankrupt KD could protect themselves from is claims in relation to their own assets and liabilities.

On this point they said, well, yes, but investors' funds have been invested in products that apparently have 'serious liquidity issues' - have a guess what that might mean.

On this point they said there is no way for them to actually release funds, so we're stuffed until they figure it out - in other words, if they can stall us we still technically have an investment. What will happen when the policy matures is anyone's guess.

So I registered a complaint and asked them to advise me of my options, at which point they actively attempted to deter me from approaching the Ombudsman, 'advising' me that it wouldn't be in my interests.

They kept referring to my claim as 'compensation', when the correct term should be 'withdrawal'.

And they kept trying to get me to take on board their problems, when the whole point of hiring professionals to solve problems is to avoid that. I have enough problems of my own - a retired disabled mother with a broken boiler and no money to replace it.

So short of picketting PWC main office, can anyone suggest what to do? I'd like to think they can't go on failing to mention the fact that the money's gone.

This undermines confidence in everything - paper investments, even tightly regulated ones far too risky, FSCS protection questionable meaning and worth. How are the public to maintain confidence in this system after this? Is not the loss of this confidence also a potential risk to the nation state that depends on it? Is that an exaggeration?

ewan_husahmi

Next question;
given that the whole insolvency issue of Keydata hinged around a tax bill they hadn't budgetted for, why is it not a good idea to ask the investors who are at risk to pay the tax bill?

As investors in this scheme, we'd much rather lose a proportion of it because of the mistake over tax, than lose the lot apparently for our own protection.

Or is it too late for that?

dunstonh

It's not so much that keydata failed. That would be a minor irritation. Its the fact that Lehmans failed that caused the problems.

They kept referring to my claim as 'compensation', when the correct term should be 'withdrawal'.

It is compensation as the name of the FSCS suggests. Financial Services Compensation scheme.

So I registered a complaint and asked them to advise me of my options, at which point they actively attempted to deter me from approaching the Ombudsman, 'advising' me that it wouldn't be in my interests.

That is correct. The FSCS are dealing with it. The FOS are not. When a firm is trading and has assets the FOS handle things. When a firm is in default and has no assets, the FSCS deal with it. So, the FOS has no remit. Many feel that the FSCS and FOS should be merged but as it stands they operate independent from each other.

Part of the problem is the failure of the FSA to classify keydata as a product provider. It had them as an intermediary which they were not. The PIA (regulator before the FSA) had them as a product provider. The main problem though is that this is new territory for the FSCS. There has been a lot of debate on who has the liabilities and what is and is not covered by the compensation scheme.

When we asked about the withdrawal process, they told us that being a 7-year plan there is no facility for early withdrawal. Not true! I still have it in black and white from the original brochure.

That is when the plan existed. Effectively a number of the plans have failed and are now being reviewed to whether they are covered under the compensation scheme.

I have enough problems of my own - a retired disabled mother with a broken boiler and no money to replace it.

These products were fixed term products. You will just have to wait until its resolved. However, if your mother was told to invest in a fixed term product without having sufficient cash savings left over, there could be grounds to complain against the adviser that recommended the product (Assuming there one and it wasnt purchased direct or via mailshot).

ewan_husahmi

dunstonh wrote: »

It's not so much that keydata failed. That would be a minor irritation. Its the fact that Lehmans failed that caused the problems.

Which all adds up to the fact that we were sold a lemon, my question is what to do now?

dunstonh wrote: »

It is compensation as the name of the FSCS suggests. Financial Services Compensation scheme.

As mentioned, we were told when this happened that our funds are safe - we are not after compensation, we are after a normal withdrawal from our funds. If the funds are safe this should be easy.

dunstonh wrote: »

That is correct. The FSCS are dealing with it. The FOS are not. When a firm is trading and has assets the FOS handle things. When a firm is in default and has no assets, the FSCS deal with it. So, the FOS has no remit. Many feel that the FSCS and FOS should be merged but as it stands they operate independent from each other.

The point here is that they should advise us how to take our complaint further if we are not satisfied. In fact they have tried to deter us from taking it further, and in doing so appear to be offering advice. I think this is inappropriate on two counts.

dunstonh wrote: »

Part of the problem is the failure of the FSA to classify keydata as a product provider. It had them as an intermediary which they were not. The PIA (regulator before the FSA) had them as a product provider. The main problem though is that this is new territory for the FSCS. There has been a lot of debate on who has the liabilities and what is and is not covered by the compensation scheme.

Whatever - the point is how are we supposed to have faith in a system that can let us down?

On the one hand the funds aren't safe so we can't withdraw them, on the other, they are safe, so no compensation. Which?

We will never, repeat never invest this way again - it's under the mattress for us and less work for your industry. As an IFA can you give me reason to think otherwise???

dunstonh wrote: »

That is when the plan existed. Effectively a number of the plans have failed and are now being reviewed to whether they are covered under the compensation scheme.

I wait with bated breath.

dunstonh wrote: »

These products were fixed term products. You will just have to wait until its resolved. However, if your mother was told to invest in a fixed term product without having sufficient cash savings left over, there could be grounds to complain against the adviser that recommended the product (Assuming there one and it wasnt purchased direct or via mailshot).

I won't go into the totallity of financial advice we received here, suffice to say I do not blame my IFA for this, it's quite clearly not his fault Keydata screwed up. However, at the time of purchase there was a get-out clause, without this we would never have 'got in' - would you? It was a clear contractual element.

Thanks for explaining things clearly, however I am looking for a way forward, not more reasons to curl up and die.

Any other suggestions?

jamesd

Some plans were the victim of fraud. Some plans are invested in US-based life insurance contracts and they will receive money only when the people who used to own those insurance policies die. Meanwhile it's critical that money is preserved to continue paying the insurance premiums, or the policy benefit will be completely lost when the policy lapses due to non-payment.

There are other cases but those are two of them. The exact details will depend on just which investments were being used.

The main issue comes for those who didn't diversify much and who may have lost a significant part of their money. Diversification is the usual protection against this, even before compensation is considered.

ewan_husahmi

Sorry JamesD, I misread your tone, so I have edited this post...

Of course diversification softens the blow, only for the reason that it's better to lose a small proportion of your savings than all of them.

Diversification is a wise precaution, it is not supposed to excuse malpractice, mismanagement or daylight robbery. Blaming the customer or the IFA for Keydata would be hilarious, except that it's not.

ISA's are products that are sold to the man on the street as if they are an ordinary savings account from the bank, they are packaged in exactly the same way - "this is what you put in, this is what you get out, this is what you pay if you want withdraw early".

It's supposed to be the sensible starting point for investing, what the government wants us all to have. As I say, give me grounds for faith in this system - please!

jamesd

ewan_husahmi, I can't blame the customer, just say how to reduce the pain in the future. Things like this have happened before and will happen again in the future, so diversification is necessary defence.