NS&I faces £400million compensation payout over savings scandal as 'prizes withheld from bereaved families'

National Savings and Investments (NS&I) is set to pay millions in compensation to customers after a series of errors regarding payouts and its bereavement services.

Bereaved families have claimed failures in managing their money , with some saying they did not receive money that was rightfully theirs, according to the Daily Telegraph.

The government-backed bank may now pay out to around 37,000 customers, with the payout which could stretch up to £400million expected to be the biggest in the history of the 160-year-old institution.

Treasury officials are understood to be working with NS&I on the exact amount.

In some cases, the bank is accused of losing track of customers’ life savings, with some considering court action or moving their savings out of NS&I altogether.

Complaints against NS&I have more than doubled in just over three years, from around 73,000 in the second half of 2021 to almost 160,000 in the first half of 2025, according to data from the Financial Ombudsman Service.

Pensions Minister Torsten Bell is expected to update the House of Commons on Thursday, and will face questions as to whether taxpayers could end up responsible for any compensation bill.

Chancellor Rachel Reeves, who oversees NS&I, is already under rising pressure to rein in spending.

The ongoing conflict in the Middle East threatens to cause an inflation spike, while she is already putting together a bailout package for consumers facing an energy bills crisis fuelled by the conflict’s effect on oil and gas supplies.

NS&I boss Dax Harkins is also under fire for failing to keep a lid on the spiralling costs of the bank’s business transformation programme, which have reached £3bn.

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The programme, originally called Project Rainbow, was launched in 2020, and was designed to reduce running costs and modernise operations, but was called a “full-spectrum disaster” by the public accounts committee in a report last month.

An NS&I spokesperson apologised on Wednesday, saying: "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."
Shadow chancellor Sir Mel Stride said: “Hard-working taxpayers could be asked to pick up the bill for what appears to be a staggering failure of oversight.

The idea that £400m of taxpayers’ cash may now be needed to put right years of mismanagement is deeply alarming.

“Serious questions must be answered, and fast, about who knew what and when.

At a time when families and businesses are already being squeezed by rising prices, tax hikes and a costly energy crisis, the country can ill afford another costly bailout.”
Robert Jenrick, Reform’s Treasury spokesman , said: “This is incompetence on a staggering scale.

Rachel Reeves must explain how this happened and who will be held accountable.

The public should not be forced to pay for a government-backed institution’s mistakes.”
Launched in 1861, NS&I was originally known as the Post Office Savings Bank before rebranding to NS&I in 2002.

The bank serves more than 24million people with a range of savings and investment offers, including over 22million Premium Bonds holders.

NS&I’s Premium Bond prize fund rate will fall to 3.3% From April, down from 3.6%, which the bank says reflects “changes in the wider savings market.”
The value of monthly prizes will drop an estimated £35m, representing an annual saving for the bank of more than £400m.