NS&I, the government-owned savings provider, is to begin paying claims made by bereaved families of deceased clients with the bill expected to reach £367m.
The provider says it will being contacting the estates of deceased customers next week.
Due to an error by NS&I, the estates were not repaid all the money from deceased clients' NS&I accounts following a bereavement claim.
In March, NS&I estimated that around 37,500 bereavement claims with a total value of £476 million may have been affected by the issue. Folliwing a review this number has reduced and is likely to reduce further, NS&I said.
NS&I’s latest assessment is that up to 34,000 estates with a total value of approximately £367 million have been affected.
Key measures put in place for affected estates include:
- NS&I will contact all affected estates with holdings of £10 or more to reunite them with the full value of those holdings that should have been returned to them earlier. This will then be 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 (FOS) principles.
- There will be a full inheritance tax exemption for the holdings of the remediation population affected by the NS&I tracing error which are returned to the estates to which they rightly belong. To further ease the administration of estates, the personal representatives or executors will not be liable for any Income Tax ordinarily due in their role on interest accrued before death or in the administration period.
- There is nothing that families, beneficiaries or the personal representatives and executors of deceased estates need to do, NS&I says. NS&I will contact the personal representatives and executors of estates with holdings of £10 or more directly. Payments to affected estates will run over the coming months and are expected to conclude in the first half of 2027.
NS&I says the error happened because the search process used when handling a bereavement claim failed to identify all NS&I products.
NS&I has apologised for the error and had taken on 100 extra staff to support the repayment process. NS&I is also looking at where it can make further improvements to its bereavement service, it says.
Sir Jim Harra, interim chief executive, NS&I, said: “I apologise to everyone who has been affected by this issue. Beginning the process of repaying these funds is a key step in putting things right.
“We need to ensure that everybody who makes a bereavement claim with NS&I is treated sympathetically and has their case processed as quickly as possible. Today, this process is taking longer than it should. We have brought in additional staff to get the service back on track.”