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Informed Choice Radio Personal Finance Podcast

Jun 28, 2019

I had a conversation yesterday with a lady I know. Not a client, I should add.

She's recently discovered that a quarter of her pension pot is invested in Woodford Equity Income, where trading remains suspended.

The first she heard about her exposure to the fund was when her pension provider wrote to her to let her know it wasn't possible to buy or sell units. Interestingly, her independent financial adviser didn't tell her and hasn't been responding to her subsequent queries.

Now leaving aside the ability or otherwise for financial advisers to spot the risks associated with this Woodford Equity Income fund, there are some important issues at stake here.

This lady's financial adviser described the fund in one letter to his client as 'low to medium risk'. I've not seen the letter, and risk names like low to medium are fairly meaningless without detailed descriptions. But personally I don't think any fund which invests in unquoted companies could be described as low to medium risk.

The lack of communication is another cause for concern. Why did this lady have to find out from her pension provider, and not her financial adviser, that she had a quarter of her pension pot tied up in this fund? And it sounds like the communication since has been dire.

As a friend, I was able to explain to her the reasons behind the fund suspension, and what might happen next; we still don't know a) when the fund will reopen, or b) what the unit price might be when that happens. Woodford's Patient Capital Trust, his investment trust, has fallen in value by around a third in the past few weeks, which could give some indication of what might happen to his Equity Income fund, when trading eventually resumes.

The liquidity of investment funds has come into sharp focus in recent weeks, following the trading suspension imposed on investors in the Woodford Equity Income fund.