Select Committee on Treasury Minutes of Evidence


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.

CHILD TRUST FUND

  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.

UNCLAIMED/DORMANT ASSETS

  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 Ordinary Account.

  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 year" definition.

  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 holdings—where we know we have lost touch with our customer (eg mail returned undelivered); and

    —    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 being used.

TESCO PERSONAL FINANCE

  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 March 2007.

March 2007





 
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