Why you may have to pay to cash in on a loved one's Premium Bonds  (2024)

Savers are being made to pay hundreds of pounds to cash in Premium Bonds when a loved one dies.

National Savings & Investments says that if someone has more than £5,000 in bonds and savings accounts when they die, their next of kin must apply for probate to access the money.

By contrast, major banks and building societies will allow the next of kin to withdraw up to £50,000 without needing to go through this time-consuming and costly process.

When someone dies, banks and building societies will freeze their accounts until the next of kin or the executor — the person in charge of dealing with their will — has applied for an official document known as a grant of probate.

The process typically takes months, but can take years if the estate is complicated. It also costs £215 — though this is waived if the estate is worth less than £5,000.

If you use a solicitor to help there will be legal fees on top with a bill possibly running into the thousands of pounds.

If there isn't a will, instead of probate the next of kin will need to apply for a legal document called Letters of Administration, which also costs £215.

The process is different in Scotland, where you need to apply for so-called confirmation via the Sheriff Court.

Most major banks and building societies will allow bereaved customers dealing with smaller amounts to bypass these admin-heavy tasks and close accounts with just a death certificate. You may also be asked for the will, if there is one.

Each organisation has its own limit on how much money it will release without a grant of probate.

This used to be around £15,000. But many of Britain's biggest banks increased their limits following Money Mail's Looking After Your Legacy campaign, which called on financial companies to make it easier for bereaved family members to wrap up their loved ones' estates.

Lloyds Bank has raised its limit from £25,000 to £50,000 and Royal Bank of Scotland from £15,000 to £25,000.

Santander's limit is also £25,000, Barclays' is £50,000 and Nationwide's is £30,000.

HSBC has removed its limit altogether and says it will deal with customers on a case by case basis.

However, NS&I's limit remains at just £5,000.

In recent months we have received letters from readers who have lost a partner and are frustrated that, of all the banks and building societies they've had to deal with, only the government-owned NS&I wants them to pay £215 to apply for probate.

Some grieving spouses don't discover they need to apply for probate until a year after their loved one has died.

NS&I allows a spouse to keep their deceased partner's Premium Bonds in the prize draw for 12 months after their death, so many do not look to withdraw the fund immediately.

Alan Barker, 86, lost his wife after 65 years together in January 2015. She had £20,000 in Premium Bonds, which Alan left invested for the year after her death. He discovered the probate catch when he contacted NS&I in January.

Alan, who lives in North Yorkshire, says: 'No one had told me I needed to apply for a grant of probate. I sent a copy of my wife's will, death certificate and our marriage licence, but none of these were acceptable.

'I've since cashed in all my Premium Bonds to save my family the hassle when I die.'

Often married couples open joint bank and savings accounts to avoid going through probate.

This is because if an account is in both partner's names, the money passes automatically to the husband or wife when the other dies without the need to do anything. But Premium Bonds cannot be held in joint names.

This means that if someone has more than £5,000 in bonds, there is no way to avoid the issue of probate unless the bonds are cashed in while the holder is still alive.

Leslie Green, 90, lost his wife June aged 78 in October. They had £30,000 in Premium Bonds — but as they are all in her name, he has to apply for probate to get the cash.

Leslie, who lives in Kent, says: 'The banks and building societies were all fine, but when it came to the Premium Bonds, NS&I wanted me to pay £215 to get probate. 'Why should I pay to get my own money back?'

Mick McAteer, director of the Financial Inclusion Centre, says: 'Rules are fine, but logic and compassion needs to come into play when talking about the loss of a spouse.

'In this case, £5,000 is an exceptionally low limit.'

Probate costs may rise further. Under government plans announced last February, the flat £215 fee would be replaced with varying costs depending on the size of the estate, ranging from nothing if the estate is under £50,000 to £20,000 if it is over £2 million.

A spokeswoman for NS&I says: 'We have a £5,000 limit because as a public authority NS&I has responsibilities to ensure public funds are protected and not put at risk.'

v.bischoff@dailymail.co.uk