DCS and Liquidation payments

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  • 09/02/09 24/07/09
  • a depositor
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Posted: Fri, 07/08/2009 - 21:51

I am one of many pensioners who have their life savings at stake in this debacle. Following the consensus of opinion on this site I have now claimed under the DCS being a partially protected depositor.

I understand I may receive £50,000 under the DCS by the end of September 09
Using Gordon 45's estimates of Dividend payments from the Liquidator courtesy of his posting dated 11 July 09 I may receive four Dividends by Dec 2010 as follows:-

1st divi 28-8-09 14.5p 2nd divi Jan 2010 15.0p 3rd divi Summer 2010 10.0p
4th divi Dec 2010 5.0p

  1. Would it be reasonable to use Gordon 45's estimates to calculate what I may receive by Dec 2010?
  2. Is it possible there may be an improvement in the dividends between now and then?
  3. When and how does the IOMT claim its £50k back?

Thanks to Gordon 45 and others who valiantly strive to give us hope and comfort of future "returns" of our monies.
HB

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How does DCS work?

  • bigloser
  • 23/11/08 31/05/09
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  • Sat, 08/08/2009 - 04:52

Could someone please clarify a point for me. Apologies if this appears twice - I'm not too clever with a keyboard.

I am owed 220k GBP. If the final dividend is 80% do I just get 176k back or does DCS make up the 44k shortfall?.
If the latter is the case then have I just been royally messed about for the last 10 months?

I am blessed if I can find the answer to this from the stuff I've received. I find it's like wading through treacle. I'm on the other side of the globe at present so calling PWC etc is a non starter.


@bigloser

  • IceCrusher
  • 14/10/08 25/10/11
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  • Sat, 08/08/2009 - 06:59

With £220K at stake, you are a partially compensated creditor, which means that the DCS would cover you to a maximum of £50K only. Any other returns will come from liquidation.

DCS is basically a loan to compensate protected depositors (full and partial) thereby providing them with a quicker return of their money (sic). If 100% were recovered from the liquidation of KSFIoM, then the DCS would get back all of it's loan monies; if the final recovery is 80% then the DCS will receive just £40K of its loan back for each person that received the maximum DCS payment (pro rata for lesser amounts). With or without DCS you will only get a parri pasu percentage of what is recovered from the liquidation, so for a final recovery over the coming years of 80% you will receive (in dribs and drabs) a total of £176K.

If you elect to take the DCS, you would receive £50K (perhaps by end of September) but your liquidation dividends will be adjusted so that you and the Scheme Manager end up with the same overall percentage of the final liquidation. At 80% the DCS will get back £40K and you will get £126K [plus DCS of £50K] = £176K (80% of £220K). The £10K shortfall on the DCS is paid by IoMT and bank levies.

If you were to forego the DCS then the first liquidation dividend is expected to recover 14.5% by the end of August, thus you would receive £31,900. Another dividend is expected before the end of 2009; there is speculation on the percentage payout, but if the conservative figure of 15% expected by David Lovett of Alix Partners is used, then you would receive another £33,000. Under the DCS scheme, liquidation payments are used to recover monies (including any received by EPS) to the scheme manager, any surplus being paid to the creditor.

Bottom line is, DCS payments are NOT additional to the sums regained from liquidation, but are primarily intended to speed the return of monies to fully protected depositors (and those with deposits less than approx £350K based on the 14.5% first dividend). Only if the bank had no assets at all could the DCS be considered a true compensation scheme, other than that it is a loan that ensures those who deposited less than the protected sum regain that deposit in full, and those who deposited more than the protected limit receive a maximum of that compensation irrespective of the bank being broke.

This is my understanding of the basics of DCS/liquidation and I hope it answers your query; I stand to be corrected by anyone with expert knowledge of this arrangement.


@IceCrusher - your sums re DCS?

  • anrigaut
  • 19/10/08 30/10/09
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  • Sat, 08/08/2009 - 07:24

This makes no difference to bigloser, but something seems a bit wrong in your sums?

"At 80% the DCS will get back £40K and you will get £126K [plus DCS of £50K] = £176K (80% of £220K). The £10K shortfall on the DCS is paid by IoMT and bank levies."

Surely, at 80%, liquidation pays out (eventually) a total of £176k for bigloser (80% of £220k). If bigloser has not claimed (and does not claim) through DCS, then (s)he gets this directly. If bigloser has claimed DCS (and thereby received £50k earlier), then the whole of the £50k will be recovered by the DCS who then pass on the remaining £126k to bigloser. There is no £10k shortfall (if so, where has it gone?) - and bigloser costs the DCS nothing. Or am I missing something?


@anrigaut - DCS sums?

  • IceCrusher
  • 14/10/08 25/10/11
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  • Sat, 08/08/2009 - 10:16

anrigaut: you do have a point; I oversimplified my write-up. In the final analysis I conclude that the SM would receive £40K from liquidation (80% of £50K) and the depositor 80% of (£220K - £50K) + £40K = £176K. HMT/bank levies fund the shortfall of £10K between the guaranteed sum of £50K and the 80% recovered from liquidation. If this were not the case then the SM would otherwise recover 100% of £50K (or less as the case may be) for all creditors from liquidation and there would be no need for HMT/bank levies - this would be at great detriment to the higher value depositors and grossly unfair to boot. I envisage that HMT/bank levies will be adjusted and readjusted throught the recovery period to correct and balance the outcome and equalise the final payments accordingly. At the end of the day, the creditor would receive no more than (in this case) 80% of his deposit Again, this is my interpretation and if there are other notions of how this would otherwise be done in a fair and transparent manner please post!

PS I was still writing my original post and didn't see yours until after I'd saved mine.


@IceCrusher - DCS sums

  • anrigaut
  • 19/10/08 30/10/09
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  • Sat, 08/08/2009 - 10:49

You have a rather complicated way of looking at it. But I still maintain the DCS will not contibute anything to bigloser. I'll try again:

The liquidation pays out (eventually) 176k (80% of £220k) for bigloser - and that is what he gets (at least we agree on that!). He would get that with or without the help of the DCS (ie directly from the liquidator if he doesn't apply for DCS). If he does apply to DCS, then they effectively advance him £50k and then, standing in his shoes, claim from the liquidator his £176k. Of this they will keep the first £50k and then pass the remaining £126k (not £136k note) over to bigloser - who now has his £176k. Otherwise £10k has gone into a hole somewhere!

This does NOT however mean that DCS recovers all they pay out. This only applies in the case of those, like bigloser, whose liquidation payout (not deposit) exceeds £50k. Anyone with a deposit of £50k or less will need a DCS 'top-up' because they are guaranteed 100% return. With an 80% final dividend, someone with exactly £50k deposited will 'cost' the DCS (via bank levies etc) £10k (to top up the £40k from liquidation) ; this is in fact the maximum any one depositor will cost in the case of an 80% dividend. Someone with £60k will cost them £2k (50-48); anyone with £62.5k or more will cost them nothing!

Of course it's 'unfair' to larger depositors because they get no help (other than in timing) from the DCS. But you know that very well! It was ever thus!

PS I don't see this as a 'notion' but as fact!


Thanks for putting me right

  • IceCrusher
  • 14/10/08 25/10/11
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  • Sat, 08/08/2009 - 13:54

Thanks for putting me right anrigaut.
Ice


@bigloser

  • expatvictim
  • 10/10/08 01/11/10
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  • Sat, 08/08/2009 - 06:22

You will only get 176k back. If you have applied for DCS, then the DCS guarantees the first 50k of that.

In your circumstances then the DCS is effectively only contributing 18k since the remainder will come (via the DCS administrator) from the 14.5% initial payment from the liquidator.

In my opinion there has been a lot of messing around, but that does not mean you would have seen the first 50k back any sooner. Even if the DCS had been activated in October of last year, then its funding and resulting timing of payouts would likely have taken time to resolve. There is no guaranteed time frame in the DCS legisaltion.

To promise 50k (or full deposit for those with less)) on September 1, the DCS needed to know when and how much the first dividend would be to determine their exposure, (in your case initially 18k). Throw in the 'what if another bank fails' scenario and I doubt very much that the full DCS payment would have been happening any sooner than it has done even if the DCS was activated on October 10 2008.


DCS for bigloser

  • anrigaut
  • 19/10/08 30/10/09
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  • Sat, 08/08/2009 - 06:29

The short answers are 1) Yes - you just get 176k, 2) No- DCS does not make up the 44k shortfall and 3) yes - royally messed about !

However, you emailed me with this question and I replied in some detail two days ago. Maybe you didn't receive it - or maybe you found my reply also like treacle -or just didn't wan't to believe it? Anyway, in case you never received it, here is what I emailed to you:

"Hi bigloser,

I'm sorry to have to tell you that you are indeed being 'naive'. I'll try to explain simply.

The DCS is intended to protect small savers (basically those with under 50k) and is essentially a top-up scheme; ie it will top-up any dividends you receive up to a maximum of 50k total. So, if you have 220k and receive, say 176k (in due course) in dividends from the liquidation, then you will I'm afraid receive nothing more from the DCS. I'm sorry to have to tell you this, but there's no doubt about it - that's how it works; in the long run, the DCS is no help to you whatsoever - only those whose dividend payments come to less than 50k will be entitled to a top-up from the DCS.

In practice it's a little more complicated (which I guess is where the confusion arises) because the DCS is proposing to pay out up front and then recover anything overpaid from the liquidation over time. They hope to pay out the 50k in September. So IF you decided to apply to DCS now you would get 50k quite soon. But DCS then claim your dividends and will retain them until they have recovered the 50k they paid you. Only after that will you get the subsequent liquidation dividends. Since 50k is only 23% of your claim, this should happen quite soon (probably at the second liquidation payment before the end of this year), so - unless you really need the extra cash right now - it seems hardly worth your while to do this (the first dividend, expected very soon now, will be at least 14.5% which would give you 32k anyway).

I hope this makes things clearer for you. What is certain, unfortunately, is that you will get nothing from DCS in the long run. You could get some of your money sooner by applying to DCS, but the advantage will be short-lived."


Big big loser

  • bigloser
  • 23/11/08 31/05/09
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  • Sat, 08/08/2009 - 09:24

Many thanks one and all. It's now clear, albeit unpallatable.

Anrigaut, I didn't get your reply, I'd assumed I'd done something wrong in sending you the question, or pressed the wrong button and you hadn't received it. At my time of life I don't claim to be an IT wizard.

Wow, I think I'll go and mope for a while.

Thanks again one and all.
Bigloser