Update on Choice

1. What has happened?

On 18th March 2020 we took the decision to cease trading on the Octopus Choice platform due to the extreme market conditions and high volume of investors trying to liquidate their investment.

At that time, there was £267 million of capital outstanding across 397 loans. Since then we have successfully retuned £260 million of capital back to investors. We have achieved this through sale of the loans to third parties and by working with borrowers to recover money for our investors.

In recognition of the lack of liquidity for investors, we have waived all fees from Octopus Choice over the last two years. This has allowed investors to earn an additional £4 million in interest on their loans.

We are now in a position to close the Octopus Choice product and return remaining funds to investors.

2. Why have we made this decision?

The remaining outstanding loan balance is £7 million. This is made up of 19 loans, all of which are more complex cases (and may involve us taking legal action against borrowers). This is typically a lengthy process with no guarantee as to how much will be recovered from these loans.

We don’t think this is a good customer outcome for our investors. We have therefore made the decision for Octopus Capital to use its own balance sheet to cover the outstanding loans and return funds to our investors.

These loans have all been valued by an independent expert and Octopus will use this valuation to acquire the loans. As a reminder, Octopus has invested 5% into every loan (‘first loss capital’) and therefore if any loan is valued at less than 95% of the original loan value, Octopus will lose all its first loss capital on that loan.

3. What Octopus product is buying the loans?

There is no specific product buying the loans. They are being purchased by Octopus Capital, using our own balance sheet.

4. Why is it better that Octopus acquires the book versus another buyer?

The are two reasons why it is difficult to find a prospective buyer for the Octopus Choice loan book:

  1. The small size of the loan book significantly limits the number of buyers, who typically look for a size of over £100m. To consider a loan book of this size, a buyer would be looking to generate a significant return and will therefore offer a reduced price.
  2. The majority of loans are in default (i.e. the security has been sold or they are no longer paying interest) and therefore a buyer would be reliant on their ability to recover the outstanding balances. As a result, most buyers are only willing to purchase performing loans with a good history of repayment.

As part of the partial sale of the Choice book in March 2021, we explored willing buyers to purchase all loans, however this generated no interest. The independent valuer concurred with this rationale and confirmed that a prospective buyer was unlikely and if one were found, the price offered would carry a significant reduction on the current loan book.

We don’t think it is a good customer outcome for our investors to wait for the conclusion of a lengthy recovery process and it is for this reason that Octopus Capital has decided to use its own balance sheet to acquire the book and return money to investors.

5. Is the Regulator aware of this?

We have been in constant communication with the Financial Conduct Authority since March 2020 when we stopped trading on the platform. We have discussed our decision and the process followed with them.

6. When will I receive my final payment?

Provided we have your bank details, the final payment will be made on 16th May 2022 and money will reach your nominated bank account within 5 working days.

7. How much of the amount I currently have invested will I get back?

The amount you receive will depend on the loans that you are invested in. This is because some loans have a higher chance of recovery and have therefore been valued higher by the independent valuer. You will be able to see the amount you get back, and the capital lost, in your May 2022 statement available on your Choice account. This statement will be available on 15th May 2022.

All investors will achieve a positive return of at least 2% per annum, with the majority of investors achieving the target return of 4% per annum.

8. How do I see my total capital loss?

The amount will be available on your May 2022 monthly statement. This will be available to download from your account on the 15th May. We will also provide you with this amount in your 2022/23 tax statement, which we will send shortly after 31st May 2022.

9. Will I receive any accrued interest from non-performing loans?

It depends on the loans that you are invested in and on their valuation. The value provided by the independent valuer takes into account the accrued interest for each loan and in some loans this interest will be paid back to youon the 16th May.

There is £1.6m of accrued interest from non-performing loans.

10. Where can I see my total return from Choice?

The total amount of interest you have earned is available on your Octopus Choice account. We will also include the total return in the Goodbye Letters sent out to investors shortly after 31st May 2022.

11. What will happen to money in General accounts?

Provided we have your bank details; we will pay all money in your General account on 16th May 2022 to your nominated bank account. The money will reach you nominated bank account within 5 working days thereafter.

If we do not have your bank details, then your account will be moved to Octopus Investments where it will stay managed until we receive an instruction from you. Please note that at this point, your money will remain in cash and will not be earning any interest. Your money will be placed in a client money account. Please send any instructions to [email protected] quoting your Choice account number.

12. How do I add my bank details?

You can do this by logging into your Octopus Choice account and following the steps below:

  • Hover the mouse over your name at the top of the screen. This will drop down two options, ‘view account’ or ‘logout’.
  • Click on ‘view account’.
  • Add your bank details by clicking on the small pencil icon to update your information in the bank details section.

13. How do I change my bank details if I don’t have online access?

To change you bank details, please email a copy of a recent bank statement (dated within the last 3 months) showing your name, address and new bank details to [email protected].

To ensure that we pay your money to the correct bank details, please ensure that any changes are requested by 11th May 2022.

14. What will happen to money in IFISA accounts?

The outcome depends on a few different circumstances.

1.You have requested a full ISA transfer. In this instance we will automatically transfer your entire ISA to your new ISA provider on 16th May 2022.

2.You have set your IFISA instruction to withdraw. In this instance we will pay all money in your ISA account to your nominated bank account on 16th May 2022

3.Your ISA account does not fall into 1 or 2 above and its value is less than £1,000 after loans are redeemed.In this instance, we will pay all money in your ISA to your nominated bank account on 16th May 2022.

4.Other cases. In all other cases, your account will be moved to Octopus Investments where it will stay managed until we receive an instruction from you. Please note that at this point, your money will remain in cash and will not be earning any interest. Your money will be placed in a client money account and will remain within an ISA wrapper.

Please send any instructions to [email protected] quoting your Choice account number.

15. How do I initiate an ISA transfer?

To initiate an ISA transfer, please contact your chosen ISA provider and follow the steps outlined by them. Please note that transfer instructions need to come from your newly chosen ISA provider.

16. I requested for my ISA to be transferred to another provider, what will happen to it?

Once the loans are redeemed, we will transfer your final residual ISA amount to your ISA provider and with that your ISA transfer to them will be complete.

17. I have less than £1,000 in my ISA and have not requested this to be transferred to another provider – what happens then?

In our experience, most ISA providers have a minimum amount that they would accept from an ISA transfer and this tends to be around £1,000. Therefore, if you have not requested for your ISA to be transferred to another provider we will pay all money in your ISA to your nominated bank account on the 16th May.

18. When will I receive my 2021/22 tax statement?

Your 2021/22 tax statement is available to download on your client portal. Please note that once the platform is shut down on 31st May 2022 you will no longer be able to download your tax statement. If you need your tax statement after this date, please email us at [email protected]

We will also email you your 2021/22 and 2022/23 tax statements after 31st May 2022.

19. When will I receive my 2022/23 tax statement?

We will send your 2022/23 tax statement to you shortly after 31st May 2022.

20. Can I have a final statement of my account?

Yes, all investors will receive a Goodbye Letter shortly after 31st May 2022. This will contain a final statement of your account, as well as your 2021/22 and 2022/23 tax statements.

21. Will I be able to log into my account later this year to get my statements?

The Octopus Choice platform will be switched off on 31st May 2022.  You will not be able to log into your account after this date. Please download any statements you need before that date.

After 31st May 2022, you can request any statements by emailing us at [email protected]

22. How do I make a complaint?

If you have a complaint, then you can contact us through us by:

If we are not able to resolve the complaint to your satisfaction, you may have rights to refer the complaint to the Financial Ombudsman Service. Further details are available from the Financial Ombudsman Service, at www.financialombudsman.org.uk. You may request a copy of our complaints-handling procedure at any time.