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National Savings & Investment (NS&I) owes nearly £500m in missing payments to bereaved families after it emerged a long-running administrative problem had stopped them gaining access to their money. On Thursday, its chief executive, Dax Harkins, was forced out amid the scandal.

Here’s what has gone wrong at the state-owned savings bank.

What is NS&I?

Best-known for its popular monthly cash-prize draw for Premium bond holders, NS&I is one of the largest savings organisations in the UK and holds more than £240bn for 24 million customers.

Money raised from customers and through savings accounts and prize bonds is used to fund public spending. All deposits are 100% guaranteed by the government.

NS&I – originally set up in 1861 as the Post Office Savings Bank – does not have branches on the high street; instead, people open accounts online, by phone or by post. It has a number of savings and investment products, including various bonds and Isas.

What has happened?

NS&I has been accused of a series of errors dating back years, with bereaved families telling the Daily Telegraph this week of their struggles to get hold of money they are owed.

It was claimed that the bank had lost track of investments and withheld Premium Bond prizes from the families of deceased savers. Some had resorted to paying lawyers to recover their money.

On Thursday the pensions minister, Torsten Bell, set out the magnitude of problem in the House of Commons. He confirmed that 37,500 bereavement claims were potentially affected and that the families were collectively owed £476m.

Bell said that the problem had been reported to ministers in December last year. “There was an operational failure to trace accounts for some customers who had passed away,” he said.

Bell said that Harkins had been replaced by Sir Jim Harra, who previously ran HM Revenue and Customs, to sort out the mess.

NS&I has apologised. “We recognise that dealing with bereavement can be challenging and would like to apologise to anyone who has not received the customer service from NS&I that they should expect, particularly at such a sensitive time,” it said.

What went wrong?

NS&I said that it had identified an issue where the estates of deceased customers were not always repaid money from all of their accounts after a bereavement claim.

“These errors happened because the search process used when handling a bereavement claim failed to identify all NS&I products. The issue has been resolved for current and new bereavement claims and robust measures have been introduced to ensure this does not happen again,” it said.

There were already other concerns about the bank’s performance. Last month it received heavy criticism from parliament’s spending watchdog, which said that a £3bn modernisation programme has been a “full-spectrum disaster”.

The public accounts committee said that the bank had exposed the taxpayer to “unacceptable risk” as the cost had spiralled from £1.3bn and resulted in “little transformation”.

How many people are struggling to get their money back?

After a review of more than 34m customer records, NS&I has established that up to 37,500 bereavement claims with a total value of up to £476m were likely affected.

Three-quarters of the cases relate to the time between 2008 and 2025. Although £476m is a big number, to give a sense of the bank’s scale, NS&I said that in 2025 it had received 211,800 new bereavement claims and repaid £4bn.

Bell said the number of savers affected was likely to fall in future and represented less than 0.2% of NS&I’s customers, but that “it is still far too many”.

The minister said one of the bank’s top priorities was to reunite beneficiaries of late customers with any funds that NS&I holds. He added: “These deposits belong to customers – returning them in no way presents an additional liability to the taxpayer.”

What can I do if I think I am affected?

The silver lining, of sorts, is the government promise that the cash is “100% safe”. The issue is about marrying it up with the owner, not the security of funds.

In May, NS&I will publish a plan that will detail how people will be reunited with their money. This will confirm the number of missing payments and how the representatives of estates will be contacted. Estates may get interest on savings as well as compensation.

The onus is on NS&I to contact those affected and 100 new staff have been hired. The representatives of estates should not spend money on a claims management agency or a solicitor, Bell said.

Some people may be affected by tax implications as a result of the errors. The government is looking at ways to support people who face extra cost. These plans will also be published in May.

NS&I has been told to make it simpler for people to search for all of the accounts or products that they might hold.