What a fiasco. Our cherished National Savings and Investments (NS&I) has betrayed savers’ faith once again – and I fear it could take years to recover.
The 160-year-old Treasury-backed bank and home to much‑loved Premium Bonds trades on its trustworthiness.
It does not pay the best savings rates. Most Premium Bond holders have never won a single prize.
But savers are willing to overlook these downsides because NS&I is supposedly safer than any bank or building society.
While your savings with any of its rivals are protected up to £120,000 under the Financial Services Compensation Scheme, every penny you hold with NS&I is completely secure – if anything happens to NS&I, the Treasury promises to reimburse savers.
But last week, its reputation was left in tatters after it was revealed it had badly let down bereaved families.
National disgrace: NS&I has mislaid £476m across 37,000 bereavement claims putting extra strain on thousands grieving families
NS&I lost track of savings, delayed transfers and withheld payments from tens of thousands of families.
This was down to failures to trace the account details of some NS&I customers after they died, Pensions Minister Torsten Bell told MPs last Thursday.
Grieving families going through the stressful process of winding up an estate were told their loved one’s account didn’t exist.
NS&I has mislaid £476million (yes, you read that correctly) across 37,000 bereavement claims.
That’s £12,666 per person on average but my guess is that some have been denied the full £50,000 that you can hold in Premium Bonds.
In simple terms, the computer system failed to match up customers and their money.
Families dealing with a loved one’s estate, which is a dreadful strain at the best of times, have been denied their money or left waiting months on end.
NS&I has apologised and says it is working hard to make sure everyone affected is paid what they are owed.
It has promised to contact the families, beneficiaries and deceased customers’ estates that are affected.
Dax Harkins, chief executive of NS&I, fell on his sword and left the organisation. Sir Jim Harra, who was chief executive of HMRC until last April, has been parachuted in to fix this mess.
But this fiasco will leave an indelible blot on its reputation. After all, what’s the point in its guarantee of Government-backed savings if you can’t get your hands on your own money.
Ousted: Chief exec of NS&I Dax Harkins, pictured, has stepped down over the scandal
I’ve been an NS&I customer for decades, but I am now considering whether I should move my money. Not for my sake, but for my loved ones.
I hate to think that when the time comes for them to wind up my estate they would go through anything like the bereaved families who are victims of this debacle. And I’m sure I’m not the only older customer considering this.
I speak to officials at the savings giant every week and I have never been so horrified by its failings. But although distressing, sadly I’m not surprised.
NS&I’s model is very simple. It offers savings products and a monthly prize draw. But it has been letting down savers in so many ways – even before this latest scandal.
Not wilfully, but through poor systems lacking basic functionality that banks and building societies simply wouldn’t get away with.
For one, NS&I is not part of the Government’s Tell Us Once scheme, which makes the administering of an estate easier (HM Revenue & Customs, the Department for Work and Pensions, the Passport Office, DVLA and your local council are all informed about your loss in one go instead of you having to contact each one).
NS&I says banking services and investments often require more individualised contact with executors. I am sure it does, but not when it just comes to telling it about a death.
Secondly, NS&I does not subscribe to the Death Notification Service, set up by banks and building societies after a three-year campaign by Money Mail.
Grieving families no longer face having to call multiple banks to inform them of a death. Instead, they can fill in a form online – or make one phone call – and select which banks they want to notify.
Its savings products are also lagging behind its rivals. NS&I says it takes an unbelievable seven to ten working days to open its easy-access Direct Isa account – online or over the phone – and it can take longer if it needs to ask you for identity documents.
Its competitors can do it in ten minutes. Withdrawals can take up to five days to reach your bank; its competitors can pay in two hours.
Thirdly, unlike its rivals, NS&I doesn’t offer a flexible Isa, which allows savers to take money out and replace it in the same tax year without it counting towards your Isa allowance. HMRC introduced this feature ten years ago – NS&I still hasn’t got there.
And it won’t accept transfers into your Direct Isa from other providers – most competitors will.
NS&I’s Guaranteed Growth Bonds have also failed to keep up with the times.
The personal savings allowance was introduced ten years ago, allowing basic-rate taxpayers to earn £1,000 in interest a year in an ordinary savings account without paying tax. Higher-rate taxpayers get a £500 allowance.
But with NS&I bonds you can easily run into a sneaky tax bill if you go for a bond which runs for more than a year.
Most providers add your interest to your account each year and give you access to it. That means you can use your personal savings allowance each year.
But with NS&I all your interest is paid at the end of the term, set against just one year’s allowance.
All of these failings add up to one conclusion: NS&I’s systems are not fit for purpose. It repeatedly lets down its customers.
NS&I is working on a huge upgrade to its 25-year-old computer system. You’d think that savers could breathe a sigh of relief. But, sadly, I think it could make things even worse.
A scathing report from the Public Accounts Committee, a parliamentary body that ensures public spending provides value for money, in February labelled the project a ‘full spectrum disaster’.
The committee accused NS&I of wasting £3billion of taxpayers’ money in its so-far botched tech overhaul, which is already running years late and a massive £1.3billion over budget.
The project was meant to be up and running in early 2024. But now it’s not expected until March 2028 at the earliest. It hardly fills me with confidence.
NS&I’s new financial year starts today, with a fresh target of bringing in a bumper £15billion (plus or minus £4billion each side) in the next 12 months. That’s 15 per cent up on the previous year’s target of £13billion (with the same leeway on each side).
The higher target is not a vote of confidence from the Treasury. Instead, I suspect it’s because it’s cheaper for the Treasury to raise money through NS&I than in the Government bond market, known as gilts, where rates are soaring because of the Iranian conflict.
A loss of faith may make it harder for NS&I to woo savers. If we start to vote with our feet, NS&I may have to offer higher rates to keep us from leaving.
However, I think rates will have to rise this year regardless. That’s because interest rates look set to go up due to the energy crisis triggered by conflict in the Middle East. If that happens, NS&I will have to raise its rates or risk falling far behind its competitors.
In previous years, it could have relied on its trustworthiness to bring in cash without having to offer top rates. If it continues to erode its reputation, it can’t be so complacent.
Interest rates look set to go up due to the energy crisis triggered by conflict in the Middle East. If that happens, NS&I will have to raise its rates or risk falling far behind its competitors
What to do if you’ve been affected
Families, beneficiaries and deceased customers’ estates do not need to take any immediate action. NS&I has promised to contact estates that are affected.
NS&I told me last week that it will ‘provide a timetable for when it expects payments, including compensation to be completed, in May’.
But some of these cases go back 15 years. I worry that a number will miss out – for example, those who move house or change email addresses regularly.
If you think you have been affected and you do not hear from NS&I by its deadline, I’d contact it directly.
Horror stories have started to emerge, with Money Mail readers writing in to tell us about their personal battles with NS&I.
One who contacted us says he has been unable to access £12,000, which he invested in an Isa and Premium Bonds over the past ten years.
He adds: ‘I can log in to their online site and see how much I have in the account but no matter what I have tried, I am unable to access or get the money out.
‘It’s extremely worrying and upsetting, and I feel foolish that I trusted NS&I.
‘Now and again I get a win, which adds to the total, but it may as well be monopoly money as I am unable to withdraw a single penny.
‘The help pages are worse than useless and you cannot get any sense ringing their useless automated bot.’
How to find top alternatives
I can remember when NS&I customer service was excellent. Years ago, at Money Mail it was always a shock if we received a reader’s complaint about the bank.
But in its report ending April last year, NS&I’s customer service score was 84.57 per cent against a target of 80 per cent.
That’s an improvement on the two previous years – 74.15 per cent and 74.56 per cent – but it still means a lot of people are unsatisfied with NS&I.
It does not rate well with consumer champion Which?, where it was given a customer score of just 64 per cent, placing it in the bottom half of its table of savings providers.
Savers who can overlook this latest fiasco may be in line for better rates
For online banking, its customer service was rated three stars out of five. The top-rated banks and building societies managed 82 per cent and five stars.
There are plenty of savings providers who offer better rates and better customer service.
A spokesman at NS&I says: ‘We’re extremely sorry for this error and are working hard to make sure everyone affected is paid what is owed to them. We’ll also make sure that customers’ estates are appropriately compensated.
‘If you’ve recently made a bereavement claim, or have an ongoing claim, you don’t need to do anything.
‘We’ve now fixed the issue and put in place robust measures to make sure this doesn’t happen again.
NS&I has continued to work to address this complex issue, including through an extensive data validation exercise.’
- Have you been caught up in this? Email us at: moneymail@dailymail.co.uk
