The move means that up to 300,000 investors in the defunct Woodford Equity Income Fund should start to get compensation from the redress fund by early next year.

Investors have been waiting for five years for the redress scheme after the fund failed in 2019.

Link, the authorised corporate director of Woodford funds, confirmed the details this week in a letter to investors in the LF Equity Income Fund (formerly the Woodford Equity Income Fund).

If the scheme goes ahead, Link estimates that the total amount of the Settlement Fund will be up to £230 million.

It says the first distribution from the Settlement Fund, estimated to be between £180 million and £200 million, is expected to be paid as soon as the first quarter of 2024.

A spokesperson for Link said: “Launching the scheme is a positive step forward in settling claims and reaching a position where investors in the fund at the point of suspension can receive payments.

"The purpose of the settlement with the FCA is to draw the matter to a close for these investors as efficiently as possible, and we believe the scheme is the best outcome available given all of LFSL's (Link Fund Solutions) available assets will be put into the Settlement Fund, and Link Group will also make a voluntary contribution of up to £60 million that will not be made if the scheme does not become effective.  Link Group is also voluntarily contributing up to £2.5 million to the costs of the Scheme.

“As we move through the process, we have requested brokers and platforms pass on updates to investors, and updates will also be provided on our website at https://lfwoodfordfundscheme.com/. Our focus will be on providing investors with access to information to help them understand the scheme details and form their view ahead of a vote.”   

Ryan Hughes, AJ Bell head of investment partnerships, said: “Investors will be pleased to see further details regarding the redress scheme on the Woodford Equity Income fund which sets out the potential amount available for distribution and the timeframe around this.

“This is an important next step for investors looking to be compensated for the failure of the fund, with c£230m being earmarked as available for investors who held the fund at the point of suspension on 3 June 2019.”

Mr Hughes said the deal represented “light at the end of the tunnel for investors.”

The compensation will depend on the sale of the Link Fund Solutions business and the approval of the scheme by investors.

Investors will be given a vote on the proposed scheme.