NS&I breaches net-financing target
A rush of savers seeking "safe" accounts amid the uncertain economy has caused NS&I to breach its target for how much money it is allowed to raise.The Treasury-backed body said it overshot its target for net financing - the amount of money left over for the Government after withdrawals and interest payouts - by £18 million in the year 2011-12.
The increase was caused by a "small number" of customers placing large amounts in accounts which guarantee up to £2 million, since November, while people had not taken their money out as expected.
Unlike banks and building societies which are covered by a scheme to compensate customers for up to £85,000 if they go under, NS&I is able to guarantee 100% of deposits because it is backed by the Government.
A spokesman for the group said the global instability and the problems in the eurozone towards the end of last year were a "key driver" in people placing large sums into its Direct Saver accounts, in which up to £2 million can be placed per person, with no set investment term. Alongside this, NS&I said it saw a drop in people withdrawing money across its range.
The group moved to stem the build-up by cutting the interest rate on its Direct Saver accounts from 1.75% to 1.5% in January, in a move affecting just under 20,000 customers. But it still meant NS&I delivered £4.02 billion in net financing for the year 2011-12 despite its target of a maximum of £4 billion.
High inflation has meant that under-pressure households have had a tough time trying to find any accounts to give them real returns on their money.
NS&I was also forced to withdraw an inflation-beating product last summer because of its popularity. The five-year index-linked savings certificate attracted nearly 500,000 savers over a four-month period. However, the spokesman said that even when this product was withdrawn, NS&I was still on course to meet its target for 2011-12.
The group saw a gross inflow of £18.3 billion during the last financial year, the largest amount since the £26 billion placed in 2008-09 by consumers. Some £16.7 billion was taken out of accounts in 2011-12, which is also the lowest figure since the rocky 2008-09 period.
The group's results for this year so far have been brought into line with its targets, with the amount of money flowing in standing at less than half of that seen a year earlier.
The group moved to stem the build-up by cutting the interest rate on its Direct Saver accounts from 1.75% to 1.5% in January, in a move affecting just under 20,000 customers. But it still meant NS&I delivered £4.02 billion in net financing for the year 2011-12 despite its target of a maximum of £4 billion.
High inflation has meant that under-pressure households have had a tough time trying to find any accounts to give them real returns on their money.
NS&I was also forced to withdraw an inflation-beating product last summer because of its popularity. The five-year index-linked savings certificate attracted nearly 500,000 savers over a four-month period. However, the spokesman said that even when this product was withdrawn, NS&I was still on course to meet its target for 2011-12.
The group saw a gross inflow of £18.3 billion during the last financial year, the largest amount since the £26 billion placed in 2008-09 by consumers. Some £16.7 billion was taken out of accounts in 2011-12, which is also the lowest figure since the rocky 2008-09 period.
The group's results for this year so far have been brought into line with its targets, with the amount of money flowing in standing at less than half of that seen a year earlier.
© 2013 Press Association