We all have a vested interest in seeing NS&I rediscover its mojo

For decades, NS&I was a national treasure. Launched in 1956, this government-backed bank won the trust of the British public, and premium bonds have been the jewel in its crown, attracting the savings of families down the generations.

Premium bonds are government-backed savings products where, instead of earning interest, your investment is entered into a monthly draw for tax-free cash prizes ranging from £25 to £1m.

Yet NS&I’s reputation is in ruins. It has apologised to thousands of bereaved families who have spent years trying to access their relatives’ savings. Chief executive Dax Harkins has been forced to resign, and the government says compensation and automatic refunds will follow.

It’s no secret NS&I has a problem with paying out on estates. I’ve heard from many who have battled to prove the very existence of family premium bonds – let alone their entitlement to them.

The sheer scale of the crisis only became clear this week, however. The pensions minister, Torsten Bell, told MPs that about £470m has been needlessly locked away, and 37,500 people have been unable to access what is rightfully theirs.

How did things get this bad? In part, NS&I is a victim of its own success. For decades, it guaranteed the safety of people’s savings in a way the commercial sector could not match. Families routinely bought paper bond certificates from post offices, often for children and grandchildren, hoping one day to win big.

Over time, those certificates got lost or buried in paperwork, making savings harder to trace. Keeping track of historic accounts, some of which are up to 70 years old, would not be easy for any institution. But that is only part of the story. Complaints upheld by the financial ombudsman show NS&I’s record-keeping and processes have not been fit for purpose. Even when beneficiaries had legal authority and all the correct paperwork, they were given incorrect information, faced long delays or were forced to send original documents or hire lawyers at extra cost. Some were even carelessly addressed as their dead relatives.

MPs on the public accounts committee have also concluded that a £3bn digital upgrade, launched in 2020, has been a waste of money and might never be finished. Their recent report pointed to a “good news culture” that discouraged challenge and scrutiny.

There is a deeper risk here. The Treasury depends on NS&I savings to help fund public spending, with a current net financing target of £13.6bn. But savers now have other options. Most banks and building societies offer protection up to £120,000 under the Financial Services Compensation Scheme, while premium bond holdings are capped at £50,000. If people start to lose faith in NS&I, they could easily take their life savings elsewhere.

If NS&I does not quickly get a grip, the Treasury risks losing vital funds during a global crisis – and watching a once-loved institution unravel in full public view.

Photograph by UrbanImages / Alamy Stock Photo