Page last updated at 10:39 GMT, Wednesday, 4 March 2009

Record deposits at saving 'haven'

NS&I said the savings surge followed turbulence in the financial markets

Consumers' fear for the safety of their savings led to a record level of deposits with National Savings and Investments (NS&I), figures have shown.

NS&I, which has a 100% government deposit guarantee, saw the amount saved with it rise to £9.55bn in the last three months of 2008.

This was up from £5.67bn in the previous three months and £3.99bn in the April to June quarter.

A safety net covers the vast majority of other deposits held by savers.

Since 7 October 2008, the threshold on the Financial Services Compensation Scheme has been raised so each saver's first £50,000 per bank is fully protected.

Savers' trust

NS&I, which has 27 million customers, has now seen £19.22bn deposited with the group since the start of the financial year.

Officially, the first £50,000 of savings per person per institution are covered
This threshold was raised following the Northern Rock saga
The government's actions so far suggest it has effectively guaranteed all savings

That is higher than the amount lodged during the whole of 2007-08 (£15.54bn) and during 2006-07 (£14.17bn).

It described the inflow of funds as "unsolicited" and the result of "turbulence in the financial markets", following the collapse of Lehman Brothers, the takeover of HBOS by Lloyds TSB and the nationalisation of Bradford and Bingley.

The government raises money through NS&I and the group has to balance the interests of savers and taxpayers.

The group had been working to a five-year strategy to deliver £13bn of net financing to the government and save taxpayers £1.6bn by March 2012, but said that "recent market conditions" meant it would review this plan.

Interest rate cuts

In January, cuts of up to one percentage point were made in the returns on NS&I's variable rate accounts, such as its easy access savings accounts and its ISAs. The interest on its income bonds went down by half a percentage point at the same time.

NS&I announced that interest rates on some variable rate policies were being cut by up to three-quarters of a percentage point from 19 February after the Bank of England cut its official rate from 1.5% to 1%.

Fixed-rate deals for new savers were cut by up to 1.35 percentage points, but Premium Bond prizes remaining unchanged for the time being.

However, NS&I also revealed that 550,000 Premium Bond holders were missing out on funds, because a record £30m of prizes remained unclaimed. They ranged from a £25 prizes dating back to November 1957, up to a prize of £100,000.

Prizes often go unclaimed because people move house and do not update their details.

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