Savers Withdrew Another £13bn from NS&I Accounts Last Quarter

The exodus from National Savings and Investments savings accounts continued this spring, as consumers sought better interest rates elsewhere and spent some of their pandemic hoards.

The latest figures from the Treasury-backed bank reveal that savers withdrew £13 billion between April and June of this year. That’s significantly higher than the £12.2 billion deposited that quarter. £600 million in receipts from capitalised and accused interest and prizes took the net loss to just £200 million for the quarter.

That contrasts sharply with last spring, when savers loaded £20 billion into NS&I savings products, increasing its net financing by £14 billion. But that was during the early months of the pandemic, when lockdown left many of us with extra cash and NS&I, charged by the Treasury with raising £35 billion (+/- £5 billion) for coronavirus relief efforts, offered the healthiest interest rates around.

That changed when NS&I announced last September that it would slash rates on its accounts to as low as 0.01% from November and also phase out Premium Bond cheques. While the bank later reversed its decision about the cheques, many consumers had already scurried away, withdrawing £13 billion between October and January.

The flight meant that although NS&I raised a record £23.8 billion in the year ending in March, it fell short of its government-instructed target of £35 billion (+/- £5 billion).

With NS&I interest rates still stuck at 0.01%, the exodus has continued throughout 2021, as customers sought out more competitive rates. NS&I also attributed the outflows to customers increasing their spending in a reopened economy.

“The impact of the interest rate reductions made by NS&I towards the end of 2020 has continued to be reflected in the volume of outflows NS&I experienced in Q1 2021-22, while the opening up of the economy has also had an effect on savers’ behaviour,” the bank said.

Fortunately, this year’s Budget only requires NS&I to raise £6 billion—level with the target initially set for 2020-21 before the arrival of coronavirus in the UK. 

NS&I says it remains a cost-effective way of raising this money. In the spring quarter, it saved the taxpayer £38 million. That was the level of its ‘value indicator,’ the difference between its cost of servicing existing customer’s deposits and how much it would cost the government to raise the funds through the wholesale market with equivalent gilts.

That’s despite the bank paying customers nearly £1 million in compensation for customer service failings last year.

Deluged with new deposits in the spring and summer and then with withdrawal requests in the autumn, NS&I left customers on hold for upwards of an hour and waiting weeks to access their funds. NS&I teams were also struggling to get through complaints. The bank apologised for the failings and said it had taken on new staff to deliver more responsive customer service.

NS&I continues to hold £202.8 billion of savers’ money.