NS&I breaches net-financing target
Aug 05 2012
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.
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