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Barclays sweetens AIG redress with extra interest payments
by Danielle Levy on Sep 13, 2013 at 07:55
Around 800 Barclays clients whose money was locked up for four years after investing in the AIG Enhanced Variable Rate fund have been offered compensation for lost interest up to September 2012 – even though they received their money back last July.
The offers have been sent to clients who were invested in the fund at the time of its suspension in September 2008, caused by a run on the fund post-Lehmans.
At the time, clients were given the option to withdraw 50% of their capital and have the remaining 50% locked up in the AIG Protected Recovery fund (PRF) for four years to avoid a 13.5% haircut. Some clients borrowed against the money that was transferred to the PRF.
Clients have been offered compensation for lost interest payments on a tiered basis from their initial investment date through to 27 September 2013. Interest payments start at 4% from the initial investment date to 6 November 2008, 2.5% from this date to 5 March 2009, dropping to 1.5% up to 1 July 2012 when the PRF closed.
Clients have been offered supplementary interest of 2.5% from this time up to 27 September 2013. This compares favourably with some Coutts clients who were initially offered less than 0.25%. It is understood clients will also receive borrowing costs back. If they accept the offer and payments are made before 1 October (before the introduction of new terms under the Finance Bill 2013) responsibility for deducting income tax will fall to them. From 1 October onwards Barclays will deduct income tax and report this to HMRC.
The bank was unable to disclose the underlying calculations and whether clients could be compensated for tax liabilities triggered from unplanned withdrawals from the bond wrapper. In late July, Barclays announced it had set aside £22 million for 'client remediation provision' in its first half results.A spokesperson said the bank was ‘working through all the various investment scenarios and tailoring our approach on whether we need to offer clients compensation accordingly’.
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