NS&I to repay £476m to bereaved families after savings payout failures

Compensation and interest also promised after thousands were left unaware of money owed

Bereaved families who were not paid savings held with National Savings & Investments (NS&I) are set to receive compensation after a major failure left tens of thousands unaware of money they were entitled to.

Treasury minister Torsten Bell told MPs that up to 37,500 customers may have been affected, with as much as £476 million in deposits not paid out. Around three-quarters of cases relate to the period between 2008 and 2025.

The government said compensatory interest will be applied automatically where money was withheld, while more complex cases will be reviewed individually.

The issue emerged after NS&I identified a flaw in its bereavement process, which failed to trace all products held by deceased customers. As a result, families were often paid only part of what they were owed, or nothing at all, without knowing further savings existed.

Nikki Stopford, co-founder of Consumer Voice, said:

“This is £476 million that should already be in the hands of grieving families – and they should receive it in full, with fair interest and proper compensation for the harm caused at the most vulnerable time in their lives.”

NS&I is expected to publish full details of its compensation scheme in May, including how interest and compensation will be calculated. Sign up to Consumer Voice to stay updated and get clear guidance on what it means for you.

How the NS&I bereavement payout failure happened

NS&I only alerted the Treasury to the problem in December, triggering a wide-ranging review involving external advisers and legal experts. Since then, more than 34 million customer records have been examined in an effort to understand the scale of what went wrong. 

The failure stretches back nearly two decades. Stopford said the impact on families should not be underestimated:

“Bereaved families trusted NS&I to do right by their loved ones. Instead, the system failed them quietly, and in many cases, for years. That is not a minor administrative error, it is a serious breach of the duty owed to some of the most vulnerable people who interact with financial services.”

The scale and nature of the failure have raised wider concerns about oversight at a government-backed institution. Liberal Democrat frontbencher Bobby Dean described the situation as a “hammer blow to trust”, adding that the impact on bereaved families made it “particularly damaging”.

NS&I maintains that the issue has now been resolved for new bereavement claims, with additional safeguards put in place to prevent a repeat. But the scale and duration of the failure have already prompted significant change at the top of the organisation.

Chief executive Dax Harkins is stepping down, to be replaced by former HMRC boss Sir Jim Harra, a move ministers have described as offering a “fresh start”.

Despite not being regulated by the Financial Conduct Authority, the government has made clear that it expects NS&I to meet the same standards as regulated banks, a benchmark critics say it fell well short of in this case.

NS&I compensation: what bereaved families should receive

While NS&I has confirmed that money will be repaid with interest, key details of how compensation will be calculated have not yet been published. For affected families, the difference could be significant.

“Families have been denied funds they were owed, sometimes for over a decade. Compensation needs to reflect the real harm, including the time, the stress, and in some cases the lasting financial impact. Interest alone will not cut it,” added Stopford.

The Treasury has acknowledged that there may also be tax implications for some estates and said it is exploring ways to ensure families are not left with additional administrative burdens as a result of the failure.

How NS&I interest will be calculated

The rate at which interest is calculated is one of the most significant unanswered questions. 

An important benchmark is the 8% simple interest rate used by courts when money has been wrongly withheld. This was also applied in large-scale redress schemes such as PPI and reflects the loss of access to money over time.

By contrast, using lower savings-based rates, particularly during the period of near-zero interest rates after the financial crisis, could significantly reduce what families receive.

Stopford added: “The court rate for money wrongly withheld is 8% simple interest. NS&I should be held to at least that standard. Anything less is asking bereaved families to subsidise an institutional failure that was not their fault.”

NS&I is expected to set out its full approach, including how interest and compensation will be calculated, in a delivery plan due in May.

What to do if you think you may have been affected

NS&I has said it will contact affected estates directly, meaning most families do not need to take immediate action. If you believe you may be affected:

• Wait to be contacted by NS&I before taking action, as most cases will be handled automatically.
• Gather any relevant documents, such as account details, Premium Bonds records or old statements, which may help if your case needs reviewing.
• Review any offer in detail, particularly how interest has been applied and whether compensation reflects the delay.
• Use the Financial Ombudsman Service if you are unhappy with the outcome – it is free and can assess whether the offer is fair.
• Consider independent legal advice where estates are complex, the sums involved are significant or you need help understanding the full impact of the harm and whether compensation offered is appropriate.

Claims management companies may contact affected families following the announcement, particularly once payments begin. While they offer to assist with claims, they typically charge a percentage of any compensation received and may add limited value in straightforward cases. Where situations are more complex, independent legal advice is likely to be more appropriate.