Thousands of grieving families are set to receive money they should have been paid years ago.
Hundreds of millions of pounds linked to deceased savers were missed because of an error at National Savings and Investments.
The government-backed savings provider will start reaching out to estates of deceased customers from next week following the discovery of a significant processing failure.
Around 34,000 estates have been identified as not receiving their full entitlement after bereavement claims were lodged.
The total sum requiring repayment stands at roughly £367million.
This represents a reduction from late March estimates, when NS&I believed approximately 37,500 estates totalling £476million might be affected.
The organisation examined over 34 million records alongside independent external advisers to determine the problem's extent.
Families and executors need take no action, as NS&I will contact affected parties directly.
The problem arose because the search mechanism used during bereavement claims processing did not detect all NS&I products held by deceased customers.
This meant some accounts were overlooked when estates were being settled, leaving money unclaimed.
The flaw has now been corrected for all current and future bereavement claims, with new procedures implemented from January 2026 to prevent recurrence.
NS&I scandal victims face tax hit on £476million repayments | GETTY/NSITo compensate estates for the delay, NS&I will adjust payments upwards using whichever calculation proves more favourable: either the interest that accumulated since the error occurred, or the Bank of England base rate plus one percentage point.
This approach follows Financial Ombudsman Service principles to ensure no estate is left worse off by the wait.
Estates with holdings of £10 or more will be contacted.
Pensions Minister Torsten Bell confirmed in parliament today that the returned holdings will be fully exempt from inheritance tax.
Additionally, personal representatives and executors will face no income tax liability on interest that accrued either before the customer's death or during the estate administration period
NS&I has also acknowledged that some estates may face unexpected professional fees
| GETTYThese exemptions are designed to simplify the process for those managing affected estates.
NS&I has also acknowledged that some estates may face unexpected professional fees as a result of receiving these payments.
When letters are sent to executors and personal representatives detailing their payment, instructions will be included on how to request reimbursement for reasonable legal or administrative costs.
Each claim for additional expenses will be assessed individually on a case-by-case basis.
Initial letters to executors and personal representatives will be dispatched next week, with payments following shortly afterwards.
NS&I will send correspondence in weekly batches, with the entire repayment exercise expected to be completed by the first half of 2027
| NSINS&I will send correspondence in weekly batches, with the entire repayment exercise expected to be completed by the first half of 2027.
A dedicated telephone line will be established for any queries from affected parties.
The organisation is collaborating with specialist data search providers to obtain current contact details for each executor and personal representative.
Where estates cannot be reached, funds will continue to be held and accrue interest until contact is eventually made.
Sir Jim Harra, NS&I's Interim Chief Executive, said: "I apologise to everyone who has been affected by this issue. Beginning the process of repaying these funds is a key step in putting things right."