Britain’s National Savings and Investments, the government-backed savings bank serving more than 24 million customers, is expected to pay out some £400 million in compensation following a widening scandal over missing payments and mismanaged accounts. Treasury officials are currently working with NS&I to determine the exact scale of the payouts, which could affect around 37,000 savers, with Pensions Minister Torsten Bell set to address Parliament on Thursday.
The crisis, first exposed by The Telegraph, centers on serious failings in how NS&I handled the accounts of deceased savers. Bereaved families say the bank lost track of investments, delayed payments, and in some cases withheld Premium Bond prizes altogether. With compensation potentially running into the hundreds of millions, and NS&I’s unique 100% Treasury backing meaning no private shareholders to absorb losses, the bill may ultimately fall to British taxpayers.
A Pattern of Failures in the Bereavement Department
The complaints against NS&I paint a troubling picture of administrative dysfunction, particularly in how the bank manages accounts after a saver’s death. According to The Telegraph, some families were forced to hire lawyers just to recover money that was rightfully theirs, incurring thousands in additional legal costs. Others received letters incorrectly addressed to their deceased relatives, compounding grief with bureaucratic insensitivity.
In one documented case, NS&I lost track of two accounts linked to an investment portfolio, forcing the affected family to spend three years and roughly £20,000 in legal fees untangling the error. The mistake also triggered around £2,700 in additional inheritance tax interest because the estate had been incorrectly valued. The bank initially offered just £12,500 plus a £500 goodwill gesture before a mediator ordered full reimbursement of costs. In another case, a widower was denied Premium Bond prizes belonging to his late wife’s account after NS&I’s bereavement team failed to record that the account holder had died, despite being informed in time.
Political Pressure Mounts as Modernization Program Draws Scrutiny
The scandal arrives at a particularly awkward moment for NS&I leadership. The bank is already under fire over a £3 billion digital modernization program, originally launched in 2020 as “Project Rainbow”, that has ballooned in cost from an initial estimate of £1.3 billion. A recent public accounts committee report described it as a “full-spectrum disaster,” criticizing the bank for spending £43 million on consultants while offering vague justifications. The program is reportedly years behind schedule.
Political figures across party lines have seized on the compensation crisis. Conservative Shadow Chancellor Mel Stride called the potential £400 million taxpayer liability “deeply alarming,” while Reform UK’s Robert Jenrick demanded that Chancellor Rachel Reeves explain “who will be held accountable.” Reeves oversees NS&I as an executive agency of the Treasury. Complaints expert Martyn James, formerly of Resolver, said the failures were “not only deeply distressing for bereaved families” but could lead to significant payouts, not just for unpaid winnings but for the broader financial impact of delays.
NS&I acknowledged the failings in a statement: “We recognise that dealing with bereavement can be challenging and would like to apologise to anyone who has not received the customer service from NS&I that they should expect, particularly at such a sensitive time.”
