National Savings & Investments: Contingent Liabilities

I am today laying a departmental minute to advise that National Savings & Investments is retrospectively informing Parliament about two new contingent liabilities not previously disclosed, due to procedural oversight by NS&I.

These contingent liabilities have arisen from NS&I’s transition from a single-supplier service delivery model to a multi-supplier model. They relate to operational losses and fraud losses. Operational losses are compensatory payments made to customers due to error, default, fraud or change in the administration of NS&I’s products. Fraud losses are a subset of operational losses and in this instance relate to customer compromise through no fault of the suppliers.

In 2020, NS&I launched a transformation programme to modernise its operational systems, transitioning from a long-standing, single-supplier service delivery model to a multi-supplier model. This transformation introduced new service delivery partners and redistributed responsibilities across the entire customer journey.

Due to multiple handovers within NS&I and increased complexity of processes, it became necessary to redistribute loss liabilities among suppliers and assign them based on fault. Unlike the previous service model, no single supplier has end-to-end ownership of the service. Consequently, suppliers have limited or no control over certain stages and the associated risk management. Each supplier is therefore accountable only for the areas they directly manage. Where a customer is compromised through no fault of any of the suppliers, liability rests with NS&I, who may then seek recovery from third parties such as the customer’s nominated bank.

Following the delivery of a major programme milestone at the end of September 2025, the number of processes split across multiple suppliers has reduced as of October 2025. This will lessen the complexity associated with establishing and apportioning liability. However, some risk will remain in allocating responsibility. This is because multiple suppliers continue to deliver elements of the end-to-end service with underlying processes measured by their customer outcomes rather than by their individual components.

A key benefit of NS&I’s revised delivery model is that, unlike the previous single-supplier arrangement where potential losses were built into a risk premium, NS&I will now only bear actual losses that occur. This change ensures greater transparency and delivers better value for taxpayers. Under the new framework, NS&I will determine liability based on clear evidence of fault across multiple suppliers, reinforcing accountability and improving cost-efficiency.

A small portion of the estimated operational losses has been identified for the 2025-26 financial year; however, no disbursements have yet occurred pending HM Treasury consent. Where investigations subsequently identify a responsible supplier, NS&I will seek recovery of costs under contractual provisions.

It is normal practice, when a Government Department proposes to undertake a contingent liability in excess of £300,000 for which there is no specific statutory authority, for that Department’s Minister to present a departmental minute to Parliament giving particulars of the liability created and explaining the circumstances; and to refrain from incurring the liability until 14 sitting days after the issue of the minute, except in cases of special urgency.

However, at the time the potential liabilities were initially assessed, NS&I concluded that they constituted part of its “normal course of business” as described by “Managing Public Money” and the contingent liability approval framework. This was on the basis that the occurrence of such liabilities was considered to arise from its core function of raising cost-effective financing for Government by issuing and selling retail savings products to the public. Following a more extensive review and discussion with HM Treasury, NS&I has subsequently determined that the new service delivery model resulted in NS&I taking on liabilities that were previously retained by a single supplier, giving rise to the two contingent liabilities.

Given the initial assessment of the nature of the expense, it is regrettable that NS&I was unable to provide the House with the normal period for consideration prior to the contingent liabilities being entered into. NS&I therefore acknowledges that Parliament was not informed earlier and apologises for this procedural non-compliance. Steps have been taken to strengthen internal assurance processes to ensure full compliance with parliamentary expectations and “Managing Public Money”.

The lifetime potential exposure for operational losses excluding fraud losses is estimated at £460,000, with only a small portion currently identified for clearance. Actual costs are expected to be materially lower, and some may be recoverable from suppliers. In addition, the lifetime potential exposure for fraud losses is £1.6 million bringing the total combined lifetime exposure to approximately £2.06 million.

NS&I has sought retrospective consent from HM Treasury.

If any of these contingent liabilities crystallise, provision for payment will be sought through the normal supply procedure.

[HCWS1201]