NS&I update as bereaved families face year-long wait for £367m payouts | Personal Finance | Finance
Thousands of grieving families caught up in the National Savings & Investments (NS&I) savings scandal may have to wait a significant time before receiving money they are owed.
The state-backed bank admitted repayments will not all be completed until mid-2027. The Treasury-backed savings giant said it will begin contacting affected families next week after revealing that around £367million belonging to dead customers had not been returned to their estates over a period stretching back 17 years. Up to 34,000 estates are thought to have been affected by the blunder, which forced out former NS&I chief executive Dax Harkins earlier this year.
The scandal centres on failures in the bereavement tracing process used by NS&I, which runs Premium Bonds and holds more than £240billion of Brits’ savings.
Officials admitted searches failed to identify all of a deceased customer’s NS&I holdings, meaning money was left sitting untouched instead of being paid to relatives or executors.
Sir Jim Harra, the former HMRC boss drafted in as interim chief executive, apologised again for the fiasco. He said: ‘This issue should not have happened. Beginning the process of repaying these funds is a key step in putting things right.’
However, families hoping for quick compensation were dealt another blow after NS&I admitted the new checking process is now taking far longer than expected. The organisation said it aims to complete all repayments by the end of June 2027.
Millions trapped for years
The errors affected bereavement claims made between 2008 and 2025. NS&I originally estimated as much as £476million may have been withheld, but has now revised the figure down to £367million.
Experts believe some of the missing accounts may involve old paper Premium Bonds and savings products dating back to the 1950s and 1960s which were not properly identified by computer searches.
NS&I said affected estates do not need to take action immediately as the bank will contact executors and personal representatives directly where at least £10 is owed. The first payments are expected shortly after contact is made.
What NS&I says
- Total owed to families £367m
- Number of estates affected Up to 34,000
- Period errors occurred 2008 to 2025
- Repayment timetable By June 2027
- Compensation Interest plus extra payments
Tax treatment Exempt from inheritance tax
To compensate families for delays, NS&I said estates will receive whichever is greater:
- the interest originally due; or
- the Bank of England base rate plus 1 percentage point.
The organisation also confirmed repayments linked to the error will be exempt from inheritance tax, while income tax normally payable on savings interest will also be waived.
Bereavement delays worsen
The repayment programme comes as NS&I struggles with wider delays in handling bereavement cases. A new claims process introduced in January has slowed response times significantly.
Sarah Coles, head of personal finance at AJ Bell, said: “NS&I is hoping to bring down the curtain on its now notorious bereavement drama by reuniting the estates of deceased customers with the money it failed to track down. Unfortunately, for anyone trying to process the estate of a loved one who had NS&I holdings, the administrative burden continues. NS&I is now taking eight weeks to respond.”
NS&I said it has drafted in 100 extra staff and hopes to get processing times back to its target of two weeks by the autumn.
Questions over £1.3bn IT overhaul
The crisis has also intensified scrutiny of NS&I’s troubled modernisation programme, known internally as Project Rainbow. The overhaul, launched in 2020, was meant to update decades-old systems but is now reported to be at least £1.3billion over budget.
It had originally been due for completion in March 2024 but is now not expected to finish until March 2028. NS&I previously told MPs that rebuilding 25 years of IT infrastructure had proved ‘more difficult than originally envisaged’.
Torsten Bell, the pensions minister, said Sir Jim had also been tasked with carrying out a wider investigation into how the failures happened and ‘what lessons must be learned’.
