Examination of Witnesses (Questions 40-60)|
21 FEBRUARY 2007
Q40 Mr Todd: This was really a sampling
exercise which was not to test the full range of this kind of
channel but actually to say: How does this relationship work and
what do we get from it and then maybe we will go to other partners?
Mr Owen: I think that is a fair
Q41 Chairman: In the last couple
of years there has been a significant increase in the use of telephone
and Internet channels for your products. How are your contracts
with your partners structured to ensure that you get the benefit
of those cost savings rather than they do?
Mr Owen: We actually pay our partners
a different rate, particularly Siemens because that is where the
cost impact hits, for the different channels in accordance with
their costs, and so the lower their costs of operating a channel,
the less we pay them.
Q42 Chairman: How do you ensure that
you are not disenfranchising those who do not have access, given
the closure of the sub-post offices that Mr Cousins referred to?
There is still a significant number of people who do not have
access to these new technologies. How do you ensure you are not
disenfranchising those customers?
Ms Platt: The key thing here is
that we have a variety of different channels: Post Office Counters,
post itself, telephone and Internet. Looking at the statistics,
a large range of our customer base, particularly the over-60s,
are using the telephone more frequently so that we are seeing
a big move in the more senior sections of our customer base to
use the telephone, and indeed 10% of our Internet sales and 31%
of our Internet requests for information are now from people over
60. We are finding that there has been a major shift in groups
of the population using in particular the telephone and a gathering
momentum over the Internet.
Q43 Chairman: One of the issues we
discussed with your predecessor was the extent to which you are
not regulated by the FSA like many of your competitors. He told
us that there were a number of areas where you were going to work
within the spirit of the FSA rules. You come yourself I think
from a regulatory sector. What has progressed since then?
Ms Platt: I think we have now
bedded down the Banking Code, which we are voluntarily complying
with and that is within the fabric of the business. We have also
transitioned to the Financial Ombudsman Service system, which
was also a big change. One interesting fact is that the year before
we moved to the Financial Ombudsman Service the total number of
complaints received was 29,000 and after we moved to the new service,
that fell to 9,000. In actual fact the Financial Ombudsman Service
definition of a complaint is less all-embracing than the one that
we were originally using. Of those, only 29 cases have gone to
the Ombudsman; 24 have been upheld in our favour; two were renegotiated;
and there are three pending. We have not actually had a decision
against NS&I in the two years that we have been running the
new system. We are very pleased that we have now moved to the
new system. That is obviously checked and audited properly and
we have moved there. In terms of the FSA, the Landscape Review,
which was conducted in 2005, reiterated the aspiration to move
to FSA compliance best practice. A programme, as my predecessor
said, had been put in place. We are part-way through that programme.
A gap analysis has been conducted of the areas where we need to
make more progress. I am certainly very keen on expediting that
programme. There are areas where we need to do more work to become
best practice FSA-compliant. You have to remember, of course that
NS&I does not hold customer assets. We do not give advice
and we do not have complex products. A lot of the areas where
financial services companies often have issues just do not apply
to NS&I. We have this rolling programme of what we are going
to do. We are well on the way down it. It needs to be speeded
up. We brought in a new Finance Director who has compliance and
risk management expertise, and so do I. We are committed to becoming
FSA-compliant but it will not happen overnight and it needs to
be managed within the context of our five-year plan.
Q44 Mr Newmark: I want to talk about
unclaimed assets. Can you tell me what the value of unclaimed
Premium Bond prizes held by National Savings and Investments is
at the moment?
Ms Platt: We have £30 million
of unclaimed prizes in Premium Bonds.
Q45 Mr Newmark: What are you doing
to find those people who are owed those moneys? What mechanisms
are you using to try to track them down, or are you relying on
them simply to track you down?
Ms Platt: No. We have a very active
tracing service and so far we have reunited 38,000 people with
£36 million, so that we are doing well in terms of identifying
customers and tracing them. The second thing is that we now have
our Premium Bond prize checker on the Internet so that people
can put in their Premium Bond numbers and check whether they have
won a prize in the past. That is also proving very useful in reuniting
people with prizes. Thirdly, but this is a longer term thing,
we have a large project to match operational data across the various
products in NS&I. As we do that, we may be able to find more
clients that we have lost track of in one product because they
may not have changed their address with one product but they have
done with another. That is a major project but it should help
us track down far more people. This business has been going for
such a long time. In the last 12 months we have had one successful
claim from 1897. We do keep records going back a long time and
we do have active claims going back for a very long time.
Q46 Mr Newmark: The Chairman asks
whether the terms are inflation adjusted. What is the current
value of the other categories of unclaimed assets? Do you have
other products out there?
Ms Platt: Looking at them in blocks,
we have £34 million of unclaimed assets in closed products;
in bond products, including Premium Bonds, the figure is £129
million; in savings certificates, £729 million; and in the
account-based products, £447 million. Those statistics are
compiled on the basis of a 15-year assumption, which may or may
not be the assumption that is used for these calculations, but
that is just so that you know what we have based them on.
Q47 Mr Newmark: The figure seems
to be somewhat different from what was in an article I saw in
the Daily Mail half-way through the year which said it
was £1.8 billion. There is a difference because it is almost
one-third more than your numbers seem to add up to?
Mr Owen: It is driven entirely
by how you define an unclaimed asset. As Jane said, these are
defined on a 15-year basis. If we have lost contact and had no
interaction for 15 years
Q48 Mr Newmark: If you go back to
1899, there might be some other moneys still outstanding?
Mr Owen: No, it is the other way
round. If you made it a very short period, the figure would be
bigger because inevitably if somebody changes address, they may
not tell us today but they might tell us next year or in three
or five years' time.
Q49 Mr Newmark: Do you think a more
accurate figure is £1.8 billion rather than £1.2 billion?
Mr Owen: No, not at all; customers
often contact us many years after enacting their products with
us. It is a fairly arbitrary figure.
Mr Todd: It sounds like a fairly typical
Daily Mail exaggeration.
Q50 Mr Newmark: I do not know. In
the case of unclaimed assets, does the National Savings &
Investments make use of other government databases in tracing
dormant accounts or is this a new system that you are referring
Mr Owen: No, we have no links
to other government databases.
Q51 Mr Newmark: Do you think that
it is right that the Government should be using the unclaimed
assets to pay down national debt? I am only asking that because,
as we all know, the Chancellor's national debt seems to have bloated
out of control at the moment. If people from 1897 or even the
1900s are ultimately coming back to claim that money, is it right
to be using other people's money to pay down the national debt?
Ms Platt: There is no difference
in treatment of the assets of someone who buys a Premium Bond
today from someone who bought a savings certificate during the
Second World War or a savings stamp earlier.. They all go to the
National Loans Fund or to the Government and are used as part
of our net financing figures. There is absolutely no difference.
The key thing is that even if somebody, or their relatives, comes
back from 1897 to claim their assets, those assets are restored
to them. There is no question of the "assets" not being
available to be restored to individuals.
Q52 Mr Newmark: I hear what you say
and thank you for that. I am trying to square what you are saying,
which seems to be the right approach, with what I read that a
Treasury spokesman said, that unclaimed assets in National Savings
& Investments and government gilts are already doing public
good; they are helping finance public expenditure. The Treasury
spokesman goes on to say that the money that is dormant is benefiting
society and every £1 saved with us helps fund the national
debt. That does not seem to tie in with what you are saying, that
this money effectively should be ring-fenced for those people
to claim at some point in time in the future. It seems to be that
the Chancellor and other Treasury ministers are holding on to
that money that may now be dormant to pay down the national debt.
Ms Platt: I may have been misleading
in the way I put this across.
Q53 Mr Newmark: I am sure you were
not. I am sure I misunderstood.
Ms Platt: All the investments
that are made by individuals in Nationals Savings products go
to the Government for Government use. Effectively they are used
by the Government. At the current time, there is absolutely no
difference; there is no ring-fencing and the assets are available
in just the same way as for someone who bought a product yesterday
or last year. What I think the Treasury official may have been
trying to get at is that in any other system it would mean that
there were two tiers, whereas at the moment there is no difference
in the way dormant assets and the current assets are treated.
Q54 Mr Newmark: If I am running my
own system, should there not be something, otherwise it is like
The Producers; you could have unlimited risk. You have
to be able to say that this is the return. I am taking a certain
amount of money. It is understandable that the Treasury wants
to use that money mainly to pay down debt or to invest elsewhere.
It also says to the public who are investing that money or giving
the money to the Government, "There will be a return on that
at some point in time in the future". Whether I claim it
today or my grandchildren claim it in 50 years' time, that ultimately
is a view, a contingent liability on the Government side, that
they will owe that money to somebody else. I do not want to get
into a technical accounting question. It seems curious that the
Government wants to take this dormant money that is sitting there
which belongs to somebody else and to use it to pay down government
debt because that then gives a false picture of the true nature
of the Government's debt situation.
Ms Platt: In terms of paying down
the government debt, maybe that wording is misleading because
all the moneys that have been invested through National Savings
and Investments products are paid to the Government, which then
uses those funds in whatever way it sees fit and it is part of
the national debt. If you were to buy a Premium Bond today, the
money that you would pay would go through to the Government to
be spent on the National Health Service or whatever the Government
chooses to spend it on. We keep accounts meticulously of what
you have paid in. If you are investing in a bond which has a rate
of interest, exactly how much interest is required and those accounts
and records are kept very carefully. If you come back next year
or your children come back in 70 years and want that money back,
the records are there and the government of the day will fund
that through their cash-flow, so there is no difference between
the way money which comes in now and these dormant assets are
Q55 Chairman: I have two or three
questions on targets. Your value-added target for next year is
actually lower than you achieved last year. Why is that?
Ms Platt: In terms of why that
target was set, it will have been a function of interest rate
assumptions and the level of net financing that we were anticipating
in our plan. In fact, the level of net financing and the value-add
will both be ahead of what we achieved last year.
Q56 Chairman: If we turn to net financing,
that was actually very much larger than you originally estimated.
Why was that?
Ms Platt: Are you talking about
Q57 Chairman: Yes. It was more than
£1 billion more, was it not?
Ms Platt: It was more than £1
billion more than the original target.
Q58 Chairman: How did you get that
Ms Platt: It is very difficult
to predict exactly what the effect of marketing strategies and
policies will be, particularly when you introduce new features.
For example, in the year under review, we had the two £1
million prizes brought into Premium Bonds and a number of market
campaigns, including a television advertising campaign. A number
of those were put in place to learn what the effects of those
types of strategies would be. In fact, they brought in far more
sales than had been predicted at the time. It is a fact that the
marketing strategies were more successful than had been predicted.
Q59 Chairman: The financing target
has now been reduced to £3 billion. Does that mean that,
after those various marketing initiatives, you are now expecting
lower sales, or have you just tweaked this target to meet the
five-year £15 billion total? Which is it?
Ms Platt: As I said at the beginning
of the session, the direction 2007 target, which was to achieve
net financing of £15 billion over a period of five years,
has actually achieved that in four. That strategy will now be
closed. The key thing is that, going forward, we are moving away
from a growth strategy to a strategy which is focusing on value-add.
We will be looking, as per the Landscape Review, to maintain a
much more steady net financing of around £3 billion a year
over the next five years. Just because the net financing is £3
billion does not mean that sales will not be ambitious because
next year there will be a large number of maturities of our certificates,
which means there will be a large number of redemptions. Even
though next year we will be working to a target of around £3
billion, we would expect to have to achieve sales of about £11.1
billion to be able to deliver that net financing. We will have
redemptions at a very high level because of the end of the term
of the certificates.
Q60 Chairman: Thank you very much
indeed. You are accountable to this sub-committee. You do owe
us a slightly better explanation, perhaps in writing, on Ms Keeble's
point. Could you go back to what was said on the Child Trust Funds
and write to me fully and formally about that decision? That will
clear it up.
Ms Platt: We will do that.
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