A grieving family mistakenly told they would inherit £30,000 in Premium Bonds by National Savings and Investments (NS&I) were awarded compensation.

The family had planned to use the money to fund funeral costs before the error was revealed, one member told the Financial Ombudsman.

Identified as ‘Mr B’, he said NS&I had written to him following the passing of his relative, Ms B, to inform him she held Premium Bonds worth around £30,000 at the time of her death.

The Treasury-backed bank later wrote again to Mr B to inform him it had mistaken the deceased with another Premium Bonds customer who has a similar name.

Ms B had no active accounts with NS&I at the time of her death, and had withdrawn her funds several years prior, it added.

The complainant had sought £15,000 in compensation from the Treasury-backed bank, but was finally awarded only £300 – two per cent of this figure.

This covered the cost of the grant of probate NS&I had requested from Mr B in its initial letter to process the estate’s funds.

Mr B had argued NS&I should also cover funeral costs of £5,335 due to the error. He had previously agreed with other family members to pool funds for some arrangements, he told the ombudsman, but after receiving the letter told them the expected money could be used instead.

However, ombudsman Katy Kidd found the investment company was not liable for these costs, concluding they had not arisen as a direct result of the mistaken letter.

Regarding the funeral costs, Ms Kidd wrote: “I can understand the difficulty of Mr B’s position here. But I’m afraid I don’t think NS&I needs to meet these costs.”

She also states NS&I had previously recognised that Mr B “personally suffered distress and inconvenience due to its mistake”, for which it sent a letter apologising for “the upset caused [and] the immense error it had made”.

The investment company is understood to have already paid £175 in compensation before the ruling.

An NS&I spokesperson said: “We sincerely apologise that on this occasion we have not provided the customer service that people should expect from NS&I, particularly at such a sensitive time.”

The ruling comes after it was revealed in March that administrative failures by NS&I had caused £367 million to not be paid into the accounts of 37,500 bereaved families.

Former chief executive Dax Harkins resigned over the episode in March, with work to compensate the affected families understood to be underway.