National Savings (Remediation Scheme) Regulations 2026
(1 week ago)
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Baroness Neville-Rolfe
That this House regrets that the National Savings (Remediation Scheme) Regulations 2026 were introduced only after a prolonged delay affecting up to 37,500 bereavement claims; and that failures by National Savings and Investments have given rise to a substantial liability for the taxpayer.
Relevant document: 6th Report from the Secondary Legislation Scrutiny Committee (special attention drawn to the instrument)
Baroness Neville-Rolfe (Con)
My Lords, this instrument provides National Savings & Investments with the legal powers it needs to establish a compensation scheme and to return money that should have been paid to the estates of deceased customers, in some cases many years ago. That remediation must now proceed as quickly and comprehensively as possible.
However, it would be wrong to allow this negative resolution instrument to pass without formally noting the harm that has been caused and the serious failures that have surrounded this entire saga. It is significant that the Secondary Legislation Scrutiny Committee drew the regulations to the attention of the House because they raise significant public policy issues and because Ministers have not answered important questions. Moreover, the Commons Statement of 26 March on the problems at NS&I was not repeated in our House because we had broken for Easter.
I add that this is not the only problem we have heard about in relation to probate. There were terrible delays, especially during Covid—sometimes of years—and I have personal experience of lost submissions to the probate office.
As recently as 6 July, we debated my noble friend Lord Mackinlay’s amendment to force financial institutions, which would include NS&I, to use the IHT423 scheme to allow executors to source funds to pay inheritance tax in advance of the unrealistic six-month deadline for probate and to avoid the punitive rate of interest: 4% above base rate, so that is 7.75% at present. All this makes you weep for the poor bereaved already going through an emotional upheaval.
The wording of my regret Motion is intended to highlight two matters: first, the prolonged delay that has affected tens of thousands of bereavement claims, and, secondly, the substantial financial consequences arising from the failures of National Savings & Investments. I also have a number of questions for the Minister, and the responses may provide reassurance. I recognise that some of the failures to which I will refer will have occurred under Conservative Administrations and, indeed, previous Labour Administrations. This is not only an administrative or a technical problem; it has had a profound human impact. Bereaved families were entitled to receive the savings of their deceased relatives but, through no fault of their own, were denied access to that money.
The search process used by NS&I when handling bereavement claims did not always identify every product held by the deceased customer. As a result, estates were repaid only part of what they were owed. The Pensions Minister said on 19 May that around 34,000 estates may have been affected, with a total value of some £367 million. I hope the Minister will tell us how many estates are now believed to have been affected, how much money remains outstanding and how confident the Government are that they have identified the full scale of the problem.
Behind these large numbers are individual families and executors who suffered real distress. Some bereaved relatives have spent years trying to recover what belongs to them, facing uncertainty and obstruction. As a government-backed savings institution serving more than 24 million people, the fundamental attraction of NS&I products is their security and the fact that the savings are backed by the Government. When NS&I fails to locate customers’ holdings, fails to unite estates with their money and leaves families pursuing claims for years, trust in that important institution is damaged.
I hope the Minister can tell us when the Government first became aware of the full scale of a problem affecting tens of thousands of families, why action was not taken sooner and whether there were earlier warning signs within NS&I that were missed or not escalated. For how long had the defective search process been operating before the failure was identified? I believe that some cases date back as far as 2008. Why did internal and external audit and Treasury oversight fail to identify this earlier? Were there letters from MPs that should have woken Ministers up to the problems facing such a vulnerable group? The departure of the former chief executive, Dax Harkins, and the appointment of Sir Jim Harra, with his long-standing experience at HMRC, are welcome and are clear indications that the Government recognise the seriousness of what occurred.
Turning to the substance of the regulations, we welcome the decision that NS&I will act proactively. However, there is also the important question of funding. The money held in these accounts plainly belongs to the estates. Returning that principal sum is not a new cost to the taxpayer; it is the repayment of money that should never have been withheld. However, compensation, additional interest, professional fees and the administrative costs of identifying and contacting affected estates represent additional expenditure. The Treasury was unable to give the Secondary Legislation Scrutiny Committee an assurance that no further support from the public purse would be required. So I ask a simple question: will NS&I funds need to be increased to meet the extra burden or not? Can the Minister tell us now what the cost of compensation, additional interest, professional fees and the operation of the scheme will be? Will these costs be met entirely from NS&I’s existing budget? If additional funding is required, will Parliament be informed promptly and transparently by the Treasury?
The Government have said that NS&I aims to complete the remediation process during the first half of 2027 and will publish quarterly progress reports. That commitment is welcome, but those updates must contain meaningful, detailed information. The House should also be told what happens if the target of completion in the first half of 2027 is missed. Who will be accountable and what external oversight will there be of the scheme?
In conclusion, these regulations are necessary. Those relying most on NS&I products tend to be those who are less sophisticated financially than perhaps in other ways. In short, the vulnerable have been those most affected. This is an unhappy situation. Hundreds of millions of pounds were not reunited with the estates entitled to receive them. Some bereaved relatives were forced to struggle with NS&I for years and incurred costs simply to recover their family’s own money. We will allow the instrument to pass because delaying remediation would only compound that harm. However, we cannot allow it to pass without demanding accountability and transparency and extracting an undertaking that the Government keep on top of delivery of this vital remediation scheme. I very much look forward to hearing from the Minister, and I beg to move.
Baroness Kramer (LD)
My Lords, as the noble Baroness, Lady Neville-Rolfe, has clearly explained, the estates of deceased customers of NS&I were not always repaid money from all their accounts following a bereavement claim. The operational failure was identified in December 2025 but reported to Ministers and publicised only in March 2026. The issues were resolved for current and new bereavement claims from January 2026, but I understand that the revised process is proving hard going and, in and of itself, is causing more delays. Can the Minister update us?
As the noble Baroness, Lady Neville-Rolfe, said, some 34,000 estates, with a total value of £476 million, were affected by the original failure. Can the Minister tell us how many of the families of the bereaved have so far been reunited with their funds in full and have been compensated for the delay? What are the costs of compensation and associated fees that will fall on the taxpayer?
I understand the pressures to resolve this issue, but frankly, when the Joint Committee on Statutory Instruments reports an SI as “requiring elucidation” on quite a number of points and for “defective drafting”, we really are talking about sloppiness, and that is not acceptable. NS&I is one of our most trusted financial institutions, holding over £240 billion belonging to some 24 million customers. It is crucial that it retains trust, which means that the response by NS&I and the Government needs to be both accurate and swift.
Lord in Waiting/Government Whip (Lord Wilson of Sedgefield) (Lab)
My Lords, I thank the noble Baronesses for their comments on what is a very important issue. To put it in some context, in March, the Minister for Pensions announced that National Savings & Investments had identified serious failings in its bereavement claims process, affecting thousands of estates. NS&I has rightly apologised to the families of the bereaved who were impacted and the Government have acted swiftly to ensure that those estates are reunited with the money they are owed.
As the Minister for Pensions and NS&I set out in May, NS&I will reunite affected estates with the funds owed to them by mid-2027 and ensure that those estates receive compensation where it is appropriate to do so. The process of issuing letters, repayments and compensation to affected estates is now under way and Parliament has passed the necessary legislation to ensure that NS&I has the powers to undertake its remediation scheme.
I turn to the details of the regulations referenced in the regret Motion. These regulations enable NS&I to pay compensation to affected estates above the de minimis. Specifically, they give NS&I the power to pay interest to estates for the entire period that their funds were wrongly disconnected from them. The funds will be adjusted upwards to include the higher of either 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. The regulations also give NS&I the power to make additional payments for other financial losses—for example, legal fees incurred because estates needed further administration as a direct result of NS&I’s error.
The regret Motion tabled by the noble Baroness, Lady Neville-Rolfe, covers two areas: the process for establishing the remediation scheme to repay claimants and, separately, the cost of that scheme. I will address each in turn, starting with the process for establishing the scheme. After the Treasury was notified about the serious failings in the bereavement claims process at NS&I in mid-December last year, officials worked at pace with NS&I to identify and address the root cause of the issue, to establish which customers were affected and to develop plans to reunite estates with the money. This was a substantial task, and NS&I, the Treasury and external advisers have worked closely to design and implement a remediation scheme which is effective, fair and meets regulatory standards. The parameters of this scheme were set out in May and the necessary regulations were then made on 10 June.
NS&I, supported by independent external advisers and expertise from across government, reviewed over 34 million customer accounts. Up to 34,000 estates have been affected, with a total value of approximately £367 million. These figures are likely to reduce and NS&I will provide an update in its quarterly progress report.
As for the root cause of the problem, as the Minister for Pensions set out in March, NS&I tracing processes failed to comprehensively trace accounts for some customers who passed away. The result of this failure is that not all savings were identified and paid to estates. NS&I has received written assurances from its customer-facing supplier and its previous supplier, Atos, that the cause of this underlying issue in their tracing of customer accounts has been addressed and will not affect customers going forward.
Several questions were asked, and I hope I can cover them all. I was asked when the remediation scheme will be delivered and how long it will take. NS&I aims to return holdings to their rightful owners as swiftly as possible and expects to complete its remediation programme in the first half of 2027. I was asked about the Treasury’s assessment of the overall cost of this programme. As NS&I is in the early stages of delivering the scheme, the expected costs to taxpayers are uncertain at this stage. Further information on expected costs will be included in NS&I’s annual report and accounts in the autumn. NS&I will be able to develop a clearer estimate as the programme progresses and more data becomes available on the average volumes and amounts of additional payments. The overall cost will also depend on the feasibility of recovering public money. NS&I will publish an update on progress, including payment of outstanding holdings, against its delivery plans on a quarterly basis.
The point of introducing the statutory instrument is to provide a clear, fair and consistent framework for customers to be reunited with the funds as quickly as possible. Without a scheme in place, the costs of handling potentially thousands of individual complaints and legal cases could significantly increase the operational burden, costs and legal fees for NS&I, and put pressure on the public finances. The Minister for Pensions said there will not be a cost to taxpayers as a result of the remediation scheme. In his Statement to the Commons, he challenged inaccurate reporting in the press that implied that the cost from returning money owed to estates would impact the taxpayer. This money is owed to these estates and will be repaid using funds provided through the National Loans Fund in the same way that funds would be transferred to a customer of NS&I wishing to make a withdrawal. These repayments are simply the return of customers’ funds and do not create any additional liability for the taxpayer.
I was asked about the existing budgets. As NS&I is in the early phase of delivering this scheme, the expected costs for taxpayers are uncertain at this stage, with further information to be provided in the NS&I annual report and accounts in the autumn. The Treasury and NS&I will together assess the feasibility of recovery costs associated with the scheme, but this is an extensive process and it will take time to make this assessment. There will also be operational costs of running the scheme and costs of compensation to affected estates where appropriate. This will be paid from NS&I budgets in the first instance and NS&I is expected to manage pressures within its budgets set at the spending review last year.
I end by reiterating the Government’s commitment to deliver redress for all those impacted by the serious failings in the NS&I bereavement claims process. The Government and NS&I have taken action to address these failings, to develop a plan to reunite customers with their money and to ensure that these failings can never happen again. The process of issuing letters, repayments and compensation to affected estates is now under way and the Government will continue to ensure that those impacted receive the support that they deserve. We take this very seriously and we want to see the money given back to those estates and the individuals who have been affected. This is an important issue and one that we want to solve as soon as possible.
Baroness Neville-Rolfe (Con)
My Lords, I am grateful to the noble Baroness, Lady Kramer, for her support and to the Minister for his helpful response. I do not think he answered my question about when the first signs of this scandal first emerged—for example, in MPs’ correspondence. I recognise that that is a difficult question to answer, but I am grateful for the regular reports that he has promised.
I do not wish to delay the establishment of the remediation scheme for vulnerable and bereaved families, which I obviously support. The money belongs to the affected estates, as the Minister said, and must now be returned, together with appropriate compensation and interest. It would therefore not be appropriate to divide the House. The important thing is to proceed with the mediation as quickly and comprehensively as possible. I beg leave to withdraw the Motion.