NS&I explains savings certificate withdrawal

by John Fitzsimons on 08 September 2011  |  7 comments
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Guest blogger John Prout, Retail Customer Director at NS&I, explains why NS&I's Index-linked Savings Certificates were this week removed from sale.

At first glance it may seem odd that this week we acted to restrict our sales, and temporarily withdrew two of our savings products from sale, including our popular Index-linked Savings Certificates.

For most businesses the objective is to maximise sales but NS&I is different to other savings providers. We are an Executive Agency of the Treasury.

This, of course, is the reason why we can offer savers 100% security on every penny they invest with us, and a range of tax-free savings. In return for these privileges we need to act responsibly to balance the interests of savers, the taxpayer, and our impact on banks and building societies in the way we manage our business. In light of this, every decision we make about the savings range we offer has to take these three elements into account so that they broadly balance out across the year. 

At the same time, we are also set an annual target by the Chancellor for the amount of money he wants NS&I to deliver to the Treasury that year – this is called our Net Financing target. In 2010-11 we were tasked with broadly balancing money coming into NS&I with money leaving us and set a Net Financing figure of £0.

In July last year we took the very difficult decision to withdraw Index-linked Savings Certificates from sale as we were at risk of exceeding our Net Finance target because the Certificates were so popular.

Fast forward to 2011 and the Chancellor set us a positive Net Financing target of £2 billion. This positive target allowed us to answer the calls of many savers and bring Savings Certificates back on sale in May 2011.

The new Issue was extremely well publicised in the media and elsewhere. It was hugely popular, with over 500,000 transactions in the just-under four months they were on sale. In fact, during that time Index-linked Certificates were our best selling product, even trumping Premium Bonds which is perennially our most popular product. We believe that those interested in investing in Savings Certificates did have a reasonable time to do so. However to ensure we don’t exceed the amount of new funds we are tasked with raising, and that we limit our impact on banks and building societies, we have had to withdraw Savings Certificates from sale again.

Some might ask why should we worry about our impact on the financial services industry. Our answer is this: it is in all of our interests as members of the public to have a stable financial services industry; to allow for lending to the public and to businesses and also form a competitive savings market.

It’s also worth remembering that this year a number of inflation-linked accounts have been offered to savers by various providers.

Don’t forget that on maturity existing NS&I Savings Certificate customers can keep their investment for another term of the same length. Alternatively they can reinvest into any of the other Savings Certificate terms and Issues on offer to existing customers – either the 3- or 5-year Issue of Index-linked Savings Certificates or the 2- or 5-year Issue of Fixed Interest Savings Certificates – regardless of which Savings Certificate they currently hold.

For those that have missed out this time round please be assured that the withdrawal is only temporary, however it is highly likely that a new Issue will not be launched until next financial year at the earliest (when we will be set a new financing target).

Readers who want to be among the first to know about future Issues of Index-linked Savings Certificates can sign-up for email notification here.

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