How on Earth did NS&I get savings rates SO wrong?

For almost 160 years, National Savings and Investments has been one of this country’s most-cherished institutions. Since its launch by William Gladstone, hundreds of millions of people have entrusted it with their nest eggs. 

It has protected the nation’s savings through most of Queen Victoria’s reign, two world wars, a financial crash and now a global pandemic. Well done NS&I. 

But the gloss is wearing thin. For the past few months, The Mail on Sunday has been deluged with correspondence from NS&I customers at their wits’ end. 

NS&I’s phone lines, they say, are jammed; letters are not answered and complaints left unresolved for weeks. With every day that goes by and chaos rules, NS&I squanders more of its greatest asset: trust. 

Error: Arguably the biggest mistake was made in April when NS&I did a U-turn on planned cuts to savings rates and Premium Bond prizes

So where did it all go wrong? Arguably the biggest mistake was made in April when it did a U-turn on planned cuts to savings rates and Premium Bond prizes. In theory, it was a good move: the aim was to ‘support savers during the coronavirus pandemic’. 

But in practice, it wasn’t. As rivals slashed rates, cash poured in from interest-starved savers. At first, the extra inflows were good news for NS&I. After all, it had a mighty Treasury target of bringing in £35billion of funds in the 12 months to next April – give or take £5billion. Set in July, it was a revision upwards from the previous £6billion. 

But its strategy was too successful. By September, NS&I had already overshot its annual target by £3billion. It was clear drastic action had to be taken. 

So, last month, it enacted rate cuts more brutal than many rivals had dared, and several times deeper than those planned in May. The rate on its income bonds plunged from 1.15 per cent to 0.01 per cent. So much for wishing to ‘support savers’. 

If NS&I had gone ahead with the modest rate cuts in May, would savers be facing such savage ones today? Maybe not – inflows might have increased at a more leisurely pace and ruthless measures would not have been needed. 

NS&I says it would still have needed to cut rates to bring them back in line with the rest of the savings market.

Unsurprisingly, deposits are now spilling out of NS&I at a rate of knots. As much as £500million was withdrawn in October and NS&I may meet its annual target – but as a result of massive inflows and then outflows, rather than through a steady, manageable stream of inflows. These rapid inflows and outflows have had other unintended consequences – leaving NS&I’s systems groaning and its customer service in disarray. 

Indeed, customer service centres have struggled, especially as staff numbers have been down due to Covid-related illness and social distancing. But what has NS&I done to reassure customers? Next to nothing. Its proactive communication has been negligible. Customers’ letters and emails have sometimes been left unanswered for weeks.

‘I’ve made no progress in four months’ 

Small queries not addressed have snowballed into formal complaints. Customers who at first felt inconvenienced have become angry and fearful that they might not be able to access their money when they need it. 

Like many customers, David Smith, from Dundee, has spent hours listening to NS&I’s ‘hold’ music in the hope of having his problems resolved, although NS&I says waiting times are now falling. The 74-year old says: ‘It’s four months – and I am no further on from when I started.’ 

NS&I has also failed to explain its inaction to loyal savers. It’s sticking to the line that any delays are ‘due to coronavirus’ – a claim that customers are no longer prepared to swallow.

As David Hall, who has waited months for an Isa transfer, reasons: ‘There is no rationale behind the argument that Covid is to blame. Other banks and financial institutions have arranged Isa transfers for me in what I would deem normal time frames.’ 

Flashback: How we have covered the crisis in recent moths

Amid this mayhem, NS&I has ploughed on with an efficiency and cost-saving drive, causing even more chaos. 

In 2014, it outsourced almost all its processes to global services provider Atos, tasking it with transforming the organisation. Atos has cut operating costs by around £1billion through various online initiatives and ending the sale of Premium Bonds from Post Office branches. 

Atos employs most of NS&I’s staff, both in the UK and India. The next job on Atos’s ‘transformation’ checklist was to ditch paper Premium Bond prizes. 

Customers had already been told they would have to register to have any prizes put directly into their bank accounts or reinvested.

But, inevitably, this simply multiplied the number of people trying to contact NS&I. Problems on top of problems. Last month, NS&I saw sense and delayed the change until the spring. Yet many customers believe the plan should be scrapped altogether. 

NS&I has changed its mind on plans to phase out Premium Bond prize cheques, and will only do so when its customer services are able to better handle calls from customers  

In the strategy outlined by NS&I and Atos, scrapping paper would be ‘leaner and greener’. But it ignored the fact many older and more vulnerable customers are uncomfortable with online processes – or with giving their bank details over the phone. 

NS&I has spent much time and resources to ensure those who prefer digital services can check their Premium Bond prizes either by an app or on an internet connected ‘smart’ device. 

But, as reader David Mills points out: ‘NS&I has a duty of care to all customers, not just those who have internet access or are comfortable with telephone communication.’ 

Until NS&I sorts out the mess it has created, it will continue failing people at every key life stage. For example, Hazel Boardley, who, instead of spending time grieving over the loss of her parents who both died this year, has endured ages on the phone to NS&I trying to sort out their various holdings. 

Outrageously, there is no fast-track phone service for bereaved customers. With such long waits, surely the compassionate thing to do would be to offer to phone them back. 

Then there is Graham Sutton who just wanted to help his son access his Isa. Graham now says: ‘I will never go near NS&I again.’ 

It is more than two months since NS&I boss Ian Ackerley told The Mail on Sunday that he was ‘really, really sorry’ about the meltdown in the organisation’s customer service. 

Well, Mr Ackerley, the time for sorrys is well and truly over. It’s now time for action, not words to rescue your 160-year-old brand. Restore NS&I’s gloss as a matter of urgency.