Premium Bonds under scrutiny in major intervention over earnings from NS&I savings

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The Government has clarified how funds from Premium Bonds are used after ministers were quizzed about how much money it earns through the scheme.

Labour lord and former justice minister, Michael Wills, asked the Government “what is their estimate for each of the past three years of their returns from retaining the proceeds of cashed-in Premium Bonds for up to six days before they are transferred to the holder’s bank account”.

Conservative peer, Baroness Charlotte Vere, said in response that NS&I provides “cost effective finance” for Government coffers “from the retail savings market”.

She explained: “It does this through offering savings products to consumers, including Premium Bonds.

“Funds raised by NS&I from these products, including Premium Bonds, flow to the National Loans Fund (NLF).

“The NLF is the Government’s main borrowing and lending account, and to this end, it undertakes borrowing (primarily by issuing gilts via the Debt Management Office) and uses proceeds and other central Government surplus balances, including funds from NS&I’s Premium Bonds, to manage its cash needs day-to-day.”

Turning to the question of the rate of return on the Bonds, she said: “The Exchequer’s cash needs are managed on an aggregate basis, meaning funds raised from Premium Bonds are not held in a separate account and do not receive a separate rate of return (which in any case is determined by the market as the government is ultimately a price taker).

“Therefore, there is not a single rate of return on NS&I proceeds and it would not be possible to provide an estimate of returns from retaining the proceeds of Premium Bonds.

“When a customer divests their holdings of Premium Bonds, these repayments are also funded via the NLF’s activities and are typically processed within three working days.

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“However, in exceptional circumstances, such as Bank Holidays, this may take longer. This process allows HM Treasury to manage Exchequer cashflows in a cost effective manner.”

Savers sometimes keep Premium Bonds as an emergency fund as they can be accessed and cashed in at any time.

Each £1 Bond goes into a monthly prize draw with big cash prizes including two jackpot prizes for £1million.

One unhappy customer contacted NS&I this week hitting out at the service and saying it was inadequate for today’s needs.

They said: “Any chance you’ll be doing an app so I can manage my Premium Bonds etc on that like most financial companies?

“Or at least recognise Samsung software. You’re just making it hardwork. Time to improve and understand how people use technology now.”

A representative said in response: “We do offer an NS&I Prize Checker app on Android and Apple devices, which you can use to check your Premium Bonds prize winnings.

The NS&I app, for viewing your balance is currently available on Apple devices and we are currently in the progress of bringing the app across all platforms.

“We appreciate your feedback on our services and have passed this onto the relevant team for you.”

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