Premium bond victim finds she's out of luck

One student lost out heavily after the bonds she bought were stolen

Hannah Jewell has been waiting three months to recover £1,700 that she invested in premium bonds because she thought the money was as safe as houses, with the chance of a big win thrown in.

Being a university student, Ms Jewell liked the feeling that she could cash in at any time, but that evaporated in August last year when she lost the bonds while visiting a friend. To her shock she has since found that another person was able to cash in the bonds, leaving her in the lurch without enough money to get by.

Even worse, the thief cashed the bonds six months after they were reported lost or stolen to National Savings & Investments (NS&I), the government agency responsible for premium bonds.

"I had been ill and when I came out of hospital [in May] I was not in a position to work," says Ms Jewell, who lives in Saul in Gloucestershire. "I tried to cash the premium bonds and National Savings refused as they had already been cashed. I had to go back to work before I was ready because I did not have any money, nor could I afford to go on holiday to recuperate.

"National Savings never said anything about hardship relief, I'm still waiting for the money and I've not been offered any compensation. They said I had to wait for my money until it was all sorted out."

Hannah's mother, Maggie Macleod, reported the bonds lost in September last year and was promised there was no risk of them being cashed by another person. "They reassured me this couldn't happen, that they took security very seriously and checked signatures carefully before making refunds," says Ms Macleod. "They said if they incorrectly cashed a bond it would be their liability." Replacement bonds were issued a few days after the loss was reported.

But when Ms Jewell attempted to cash the bonds in May she was informed they had already been repaid against the original bond certificates two months earlier. "I was told by National Savings that they carry out no identification checks for amounts considered to be small," says Ms Macleod. "I was also told that the cheque for payment was made out to a third person not at Hannah's address.

"I am incredulous at the flippancy with which they have given this money away - surely unscrupulous people could use them for money laundering. A sum of £1,700 may not be a lot of money to them, but to a student it is a great deal to lose. This is such an obvious fraud, made easy by allowing third parties to cash bonds. The fact their current advertising campaign says 'You can get your money back whenever you want' is what has provoked me to talk to you. It's a lie."

However, as Ms Macleod points out, it is tempting to suggest "other people can get your money back whenever they want". NS&I dismisses this suggestion and says that it has very tight procedures for ensuring that only bondholders can cash bonds - but that to protect security it cannot disclose what these are.

An NS&I spokeswoman, Wendy Franklin, says: "We take very seriously Ms Jewell's concerns that her premium bonds were encashed fraudulently and the case is under investigation by both NS&I's Special Enquiries Group, which deals with issues of fraud, and the police. NS&I has stringent procedures and checks for the repayment of premium bonds, but these cannot be disclosed in detail, as this could make the organisation more susceptible to fraud." But when pushed about the nature of ID checks carried out, Ms Franklin adds: "Appropriate checks are made at the time that premium bonds are purchased. As the bonds were purchased by Ms Jewell, evidence of identity checks were carried out on her at the time of purchase."

NS&I are definite that, ultimately, Ms Jewell will suffer no loss. "The encashment of premium bonds held in another person's name without their knowledge is a criminal offence and, where it does occur, we would ask the bondholder to contact the police," says Ms Franklin. "Following a satisfactory police investigation, we would repay the bondholder any necessary remittance."

NS&I also explains that its systems can advise whether a bond which has been fraudulently cashed would have won a prize in the interim. If so, the legitimate bondholder will be awarded these prizes.

Any person, including Ms Jewell, who is caused financial difficulty as a result of fraudulent encashment can request a hardship payment from NS&I, which is likely to be treated sympathetically in a case such as Ms Jewell's. This news only caused further irritation for Ms Macleod. "I didn't realise it needed a hardship request for them to consider this. She was in real need of this money back in May."

Clearer communication on the part of NS&I, as well as tighter security, might have made the last few months a lot easier for Ms Jewell.

Perhaps the biggest concern is that NS&I were persuaded to encash one person's premium bonds through a cheque made out to someone with a different name - an allegation NS&I does not deny. Nor is this the first time that security concerns over premium bonds have been raised. In March NS&I dismissed worries that a third party could encash a bond, saying all warrants for payment were issued in the name of the bondholder, marked account payee only. It now seems this reassurance may have been misleading.

HOW TO PROTECT YOURSELF

What Ms Jewell's experience illustrates is that Premium Bonds must be kept with great care and stored as securely as cash.

An NS&I spokes-woman said: "Notify us immediately if anything seems to have gone awry and notify the police." Changes of address should be advised straightaway to the Premium Bond Office, National Savings & Investments, Blackpool, FY3 9ZW.

People who live in shared accommodation need to be particularly careful about how and where they store Premium Bonds. There is not just the risk of document theft (from visitors as much as residents), but also vulnerability to identity fraud. People living in the same house may be able to steal forms of identification necessary to open a bank account in a fellow householder's name, which in turn might assist them to fraudulently cash a Premium Bond - or any cheque sent to the address.