Memorandum submitted by National Savings
and Investments (NS&I)
Following my attendance at the Treasury Sub-Committee
meeting, held on 21 February 2007, I was asked to supply further
information on when the decision not to offer a Child Trust Fund
was taken and the basis for that decision.
In addition, please find clarification on the
figures relating to dormant/unclaimed assets and the position
relating to the sales through Tesco Personal Finance that were
also discussed at the meeting.
The decision taken by NS&I not to provide
a Child Trust Fund (CTF) took place in November 2003. This was
subsequently agreed by HM Treasury.
This decision was reviewed by NS&I in December
2005 and again it was decided not to offer a CTF. Again, this
was subsequently agreed by HM Treasury.
The basis of the decision not to offer a CTF
was because providers have to offer either a stand-alone equity-based
CTF, or, alternatively they can offer a cash-based CTF but only
if they also offer an equity-based version as well.
A key part of NS&I's proposition is that
all products have a capital guarantee. Therefore to offer an equity-based
CTF with the risk that the value of the investment could fall,
would undermine NS&I's brand and reputation. There are a number
of providers in CTF marketplace including the major high street
banks and building societies so there is plenty of choice and
availability on offer to the recipients of the CTF.
NS&I has offered Children's Bonus Bonds
since 1991 and the total invested in this product is currently
£1.3 billion. This product in many ways complements the CTFs
available in the marketplace.
Lastly, NS&I's remit is to raise cost-effective
funding for the government and offering a CTF (as the scheme currently
stands) would fall outside that remit.
At the Committee meeting, there was discussion
on the amount that NS&I held in unclaimed assets/dormant funds.
The 2005 Pre-Budget Report set out a definition
under the proposed unclaimed assets scheme. This stated that:
"The Government and the industry have
agreed that the definition of an unclaimed asset should generally
cover accounts where there has been no customer activity for a
period of 15 years as that will best identify those accounts that
are genuinely unclaimed."
By strictly using the definition of "accounts",
the figure would constitute £439 million. This accounts for
unclaimed assets held in the Investment Account and the closed
At the Committee, an estimated figure of £1.4
billion was quoted. This figure is based on a preliminary review
of all NS&I products including "non-accounts" (such
as Premium Bonds and Savings Certificates) using the "15
We are currently assessing the application of
this definition across NS&I's full range of customer holdings.
Once that work has been completed, by the end of March 2007, I
will write again to the Committee with the updated figure.
NS&I would intend to use the 2005 Pre-Budget
Report "15 year" definition as the basis for all future
assessments of dormancy/unclaimed assets.
NS&I has in the past used a figure of £1.8
billion which was based on a different definition which included:
All unclaimed Premium Bond prizes;
All lost contact holdingswhere
we know we have lost touch with our customer (eg mail returned
Account products where there
have been no transactions for five years or more.
Apart from the five-year definition on account
products, no other time limit was applied to unclaimed prizes
or lost contact holdings. It means the £1.8 billion figure
is an overstatement of dormancy compared to the definition now
Finally, the Committee also asked for details
of our arrangement with Tesco Personal Finance (TPF). I can confirm
that the contract does not allow us to reveal sales figures without
TPF's consent. This consent is being sought and I intend to update
the committee, subject to consent being received, by the end of