NS&I, the state-owned savings bank, has announced a major initiative to rectify a tracing error that has affected thousands of estates of deceased customers. Starting next week, the bank will proactively contact the personal representatives or executors of estates with holdings of £10 or more, aiming to reunite them with funds that should have been returned earlier.
Scope of the Error
Pensions Minister Torsten Bell revealed to MPs that approximately £470 million in deposits and 37,500 customers have been impacted by failures to trace account details after deaths. The government became aware of the issue in December. However, as of 19 May, NS&I's assessment indicates that up to 34,000 estates with a combined value of around £367 million have been affected. The figure is expected to decrease further as the review progresses.
Compensation and Tax Relief
NS&I confirmed that affected estates will receive the full value of their holdings, adjusted upwards to include either the higher of the interest accrued since the error occurred or the Bank of England base rate plus one percentage point, in line with Financial Ombudsman Service principles. Additionally, a full inheritance tax exemption will apply to the holdings returned, and personal representatives or executors will not be liable for any Income Tax ordinarily due on interest accrued before death or during the administration period.
No Action Required from Families
NS&I emphasised that families, beneficiaries, or personal representatives need not take any action. The bank will contact them directly. Payments will be made over the coming months and are expected to conclude in the first half of 2027.
Root Cause and Remediation
The error occurred because the search procedure used when processing a bereavement claim failed to identify all NS&I products. NS&I stated that the problem has been resolved for current and new claims, with robust measures introduced to prevent recurrence. Sir Jim Harra, Interim Chief Executive of NS&I, apologised to those affected, saying: "Beginning the process of repaying these funds is a key step in putting things right." He also acknowledged that bereavement claims are taking longer than they should and that additional staff have been brought in to improve service.
Ministerial Statement
Pensions Minister Torsten Bell issued a written statement recognising the distress caused and confirmed that the Treasury has instructed NS&I to put things right swiftly and fairly. NS&I published a Delivery Plan in May detailing the remediation approach. The de minimis threshold of £10 was set lower than in some other redress cases to prioritise returning funds while avoiding disproportionate administrative burdens.
