Interview: Jane Platt, NS&I

State-owned banks are presently in vogue, but National Savings and Investments (NS&I) is very much the trend-setter. Formed in 1861, the organisation provides straightforward savings accounts, backed by the government – attracting savers’ cash that provides the public sector with an additional source of loans.

NS&I’s simplicity is one of its key strengths, and the institution has a very different culture from the free-wheeling, risk-taking private sector banks that recently tumbled Britain into turmoil. Its chief executive, Jane Platt, is very much the personification of the organisation she runs (with the help of a robot called ERNIE – but more about him later). There’s no bravado in her as she almost meekly welcomes CSW to her office, standing back and following as a photographer, journalist and press officer pile into the room.

Her quietness belies her determination and ambition: Platt enjoyed a rapid rise in the City as a fund manager, running Barclays’ stockbroking business in 2001 before moving into asset management and finally becoming NS&I’s boss in 2006. “I didn’t think I’d be at NS&I more than a couple of years, to be honest, but every time I think ‘Oh well, we’ve now got to the end of that phase,’ something else happens and I’m really energised,” she says.

Certainly, Platt’s been busy: during her tenure the NS&I has had to weather the financial crisis, playing a prominent role in the UK savings market. In fact, some banks seem to think it’s become a little too prominent.

Her word is her Bonds
“The role of the NS&I is to provide cost-effective financing for government, so effectively we raise debt for government in the retail savings market,” Platt says. “Of course, that’s not how our customers see us. They see us as a key component of the UK savings market, because we have over £100bn of savers’ money invested with us on behalf of over 25m people.” In fact, most of the people with savings in the UK have some form of investment with NS&I, such as Premium Bonds.

When designing its products, the bank has three groups to please: potential customers, the Treasury, and its rival bankers. Customers want a good deal; the Treasury wants to make money, but not at the cost of damaging the private banking sector; and rival bankers don’t want a state-owned institution harming their own efforts to attract savers and rebuild their balance sheets following the credit crunch.

It’s with these different interest groups in mind that NS&I is set a yearly target, dubbed ‘the value indicator’, for how much money the government should save by raising money through NS&I rather than borrowing on the wholesale market. However, due to quantitative easing and the Treasury’s Funding for Lending programme, it’s become much cheaper to borrow on the wholesale markets; and the Treasury has changed its line. “Before the financial crisis, our mandate had been to maximise the value indicator – but now we are tasked with balancing the interests of our three stakeholders, because the markets are so distorted,” Platt explains.

With wholesale markets so cheap, NS&I can’t compete without making big cuts in interest rates and thus hurting its customers, so in 2013-14 – as last year – the Treasury gave the indicator a range of £0 to minus £320m: in other words, it should come in somewhere between the same value as borrowing on the private markets, and up to £320m more expensive. Platt is keen to put this year’s negative figure “in the context of the fact that [NS&I] generated £1.4bn [in loan finance for government] over the past three years.”

Buy, buy, buy, stop!
Despite its current difficulties, NS&I does have advantages over its private sector competitors: it can offer tax-free savings accounts, and the government protects 100% of the money invested in it.

To keep the banking sector happy and avoid taking too much money out of the savings market, NS&I sometimes has to act in a way that annoys its customers – taking its products off the market when they prove popular. “A couple of years ago, we wanted to put an issue of our very popular index-linked savings certificates on sale,” Platt says, but “we got a huge amount of volume in the first couple of weeks on sale” – so after three months the product was taken off the market. In defence of this, Platt notes that across the UK banking sector, in 2011 “the average period that fixed-rate products with good rates of return were on sale was thirty days”.

The week before this interview, NS&I announced cuts to its savings accounts’ interest rates. Platt explains this was because “our competitors are cutting their rates,” and while previously they had been “middle of the pack”, “suddenly we found ourselves in the ‘best buy’ tables.” This cut will take place in two months’ time, she says, defending the decision on the basis that “we’re giving customers plenty of warning”.

The NS&I must constantly manage the products it offers, in order to meet the second target it is set by the Treasury: how much money it should take in. This year, it has a net £0bn target, and while that “might sound as though we can all go off on holiday for a year,” she says, customers withdraw about £10bn a year from the organisation, so “we’ve still got to do £10bn of sales in any one year to stay in the same place.”

NS&I therefore struggled when the Cabinet Office limited all government marketing expenditure, making it very difficult for the bank to promote its products. “It has taken a little while to establish a real relationship of trust with the Efficiency and Reform Group, to make sure that they are aware that the marketing that we do is really needed,” Platt says. “Unlike other government departments, we are competing with the banks and building societies – no-one has to do business with us – and in financial services if you don’t tell people regularly what you’re doing, it’s a very quick diminution on the wider range of products.” The Cabinet Office has now recognised this, with the latest government communications plan naming the promotion of NS&I products as one of its priorities, and Platt is satisfied with the spending authorisations that she has been given.

Banking on her
The savings market has been very competitive in the past few years, Platt says, especially when the banks were trying to rebuild their balance sheets. The past year has seen this tail off slightly, but “this is a very unusual position; normally the market is much, much more competitive than it has been in the past year.”

What do the banks and building societies make of NS&I, with its support from the government and ability to offer tax-free interest? “I don’t think that the banks and building societies which have strong and good management have ever really found NS&I a problem. But banks which are weaker and which haven’t got good management would find us an easy thing to complain about,” Platt responds, adding: “Given our transparency and the way we behave, I don’t think they’ve got any grounds to do that.”

Platt explains that the bank publishes its value indicator, so “the banks and building societies know, this year, for example, I’m going to raise zero, so I’m not taking any money out of the system”. This means that “even if we have rates that are market-leading at any particular point in time, we’ll be adjusting them to get back to zero. What they really should be interested in is our net effect on the overall market, not any particularly competitive position at a point in time.” Platt adds that “when I was running part of Barclays, as long as you know what other people are doing, then you can manage your business around that.”

Some customers – and, indeed, taxpayers – might find it odd that NS&I has to protect its private-sector competitors, especially given how recklessly the banks have acted over the past decade. Why couldn’t the Treasury capitalise on the favourable position of NS&I in the fall-out of the financial crisis, setting high targets to raise money and leaving popular products on sale for longer periods of time? “It’s in everybody’s interest that the banks can recover properly, and that they have strong and solid balance sheets. So it is in everybody’s interest that NS&I behaves appropriately at a time when a banking recovery is taking place,” Platt says.

“But equally,” she adds, “we have been very careful that customers who are already with us have been treated fairly. We have taken products off sale for new customers, rather than cutting [interest] rates if we have a choice. So at the moment, we only have quite a small range of products on sale, because in order to be fair to our existing customers, we have preserved the rates as much as we can for them, and not allowed [new] people to invest with us in those products.”

What benefit is there to consumers when NS&I steps back to allow the banks to compete? “Savings is one part of a banking system. Outside the savings area, there is mortgage lending, lending to small businesses, lending to large businesses, all sort of things. NS&I operates in only one part, which is the savings market. So it is important that there is healthy competition for deposits over the long-term, because generally that does mean that savers get better rates, and also that you have a vibrant economy with lots of lending.”

The financial crisis
During the credit crunch, NS&I saw a massive surge in popularity, due to the government’s 100% guarantee for all savings invested in it. NS&I took in £8bn of investments in just eight weeks after the collapse of Lehman Brothers, and the Treasury approved the increase of its target from £2-4bn to around £12bn to ensure savers felt reassured that there was a safe haven for their money.

“You can imagine what the headlines would have been like if we hadn’t have had the planning in place to cope,” Platt says. The surge in demand caused a great strain on NS&I, and staff “cancelled their lives as far as I could see, and people were just working around the clock to cope.”

Nevertheless, NS&I was keen not to take too much money out of the weakened private sector banks. So it acted counter-intuitively, encouraging staff to stay on the line with the same customer rather than quickly getting on with the next call, and asking staff to discourage people from putting their savings into NS&I. “It was really quite emotional listening to elderly customers worried about their life savings,” Platt says. “We took the limit off the amount of time that people spent on the phone with each customer, because it was more important that customers were reassured, and if possible that they didn’t move their money to NS&I unless there was a really compelling reason to do so.”

The Queen famously asked of the financial crisis: why didn’t anybody see it coming? Given Platt’s long-running experience trading in the City, what’s her take? “A lot of people were talking about bubbles, but the timing of these events and the severity of them is very difficult to predict,” she says, adding that “there is a natural tendency for group-think, which is something that you’ve always got to guard against.”

Diverse investments
It’s often said that banking is too testosterone-fuelled, and that this has led to a culture of excessive risk-taking. When this is put to her, Platt responds: “I think it’s very important that decisions are taken which are balanced, and principled, and driven by consensus and not by personality. And so one of the things we are very clear about at NS&I is that [while] we have a strong and experienced board and executive team, we make sure that all of the decisions that are taken are argued through properly and there’s no ego in any of it.”

Business minister Matthew Hancock has written a book calling for more women on the boards of big financial institutions, in order to change the culture of banking. Platt is on the advisory board of Women in Banking and Finance, a networking and support group, and says: “I’ve always championed the right people getting the right job. I think that women have a lot to offer generally – I think men do as well – but I think it’s important that women get the recognition and the opportunities that they deserve. Certainly it’s good to see more women now on boards.”

Platt herself is on a number of boards, including that of the Financial Conduct Authority – the successor to the FSA. The FCA, she notes, is “about making sure that there is appropriate regulation which will safeguard the customer and consumer, but also allow the banks to gain a stable footing for London and for the UK to be a properly competitive market that people will have great confidence in.”

But women aren’t particularly well-represented on the government’s departmental boards, and the number of female permanent secretaries has fallen. Platt counters that “I see many more women in senior positions in the civil service than I did in financial services,” although she notes that “the position may have changed in the last twelve months or so”. She believes the civil service’s current appointment system, with open competitions and panel interviews, prevents discrimination. “To have that process, which is fair and transparent, is very different to the way that appointments happen in the private sector; and that is conducive to candidates, whether they’re male or female, whatever their background, getting the right job.”

Future forecasts
The conversation turns to the future. For NS&I, the future is a £660m, seven-year contract with Atos, which will run the institution’s outsourced back-office functions and move more of its services online.

As part of this, the NS&I is winding down its relationship with the Post Office: in the future, only premium bonds will be available over the counter. This is because the Post Office has been developing its own range of financial products over the past few years with the Bank of Ireland, so “we didn’t want there to be any confusion between products which are sourced and backed by the UK government and Treasury, and those sourced and backed by the Bank of Ireland, which are very, very different institutions.”

NS&I’s outsourcing contract was given an amber-red rating in the recent Major Projects Authority report, meaning that “successful delivery is in doubt.” But Platt explains that the review was held in September, and that the project received a green rating in January. She adds that the contract will save £400m, and is also open to other departments: the Courts Funds Office is already using it, as is the Equitable Life Payments Service.

Platt’s a former chair of ACE, the Association of Chief Executives, and believes that there will be greater financial pressure on agencies and non-departmental public bodies to move closer to departments. “There are bound to be some changes of status for some government agencies, but it’s not something I’m expecting at NS&I.”

Time for a change?
Platt’s contract has been extended to 2015, and she seems to be enthusiastic about the work ahead – including continuing to work with ERNIE (or Electronic Random Number Indicator Equipment 4, to give him his proper name). It’s the computer used to pick Premium Bond numbers: the first incarnation, ERNIE 1, is in the Science Museum along with the love letters, cards and poems that were written to him.

Platt has now been at NS&I for seven years, having previously spent five at Barclays and three at Reuters. She’s “energised” at the prospect of continuing to lead the savings bank, but I can’t help but press her a little. With experience as a high-flying fund manager, and as chief executive of a major stockbroker, a global asset management business and a state-owned financial institution, wouldn’t she make a good candidate for the vacancy that’s just opened up at RBS? She laughs, saying “I don’t know,” before laughing loudly again.

“I think that I’m very happy at NS&I,” she says. But she doesn’t quite say no; and, thinking about it afterwards, I wonder if perhaps she didn’t laugh a little bit too loudly.