2.6 SBS is responsible for operational errors. For instance, if an overpayment is made to a customer, SBS has to make good National Savings' funds and take action to recover the overpayment from the customer. In the case of underpayments, National Savings bears no cost risk for any SBS errors. SBS may, if it makes too many underpayments, incur deductions from the unitary charge under key performance indicators for quality of service. SBS is also responsible for compensation to customers, for example, where sums due have been paid late. This, together with discretionary performance deductions for failing to meet key performance indicators, acts as a powerful incentive for SBS to limit the number of operational errors.
2.7 SBS accepted that it should bear the cost of all fraud by its staff and any customer fraud in excess of £250,000 in any one year. Over the last eight years National Savings has experienced customer fraud totaling an average of £287,000 a year, within a range of £204,000 to £405,000. Fraud levels were, however, significantly higher in the 1980s, reaching levels in excess of £4 million a year. In sharing this risk with SBS, National Savings aimed to protect itself from a very high level of fraud in any one year while incentivising SBS to identify how frauds are perpetrated and develop innovative ways to prevent them. SBS and National Savings have set up a joint working group to take this forward.