UK NS&I mystery rates

For those who have not yet noticed.
The UK National Savings and Investment 
"is an Executive Agency of the Chancellor of the Exchequer"
whose
"products offer 100% security, because NS&I is backed by HM Treasury".

They are offering 1 year bonds yielding 3.95% gross, for up to 1MGBP: http://www.nsandi.com/interest-rates/index.jsp

The gilts issued by Treasury with ~1year to maturity are trading at less than 0.7% yield.
It is difficult to arb for technical reasons, (see discussion on: http://www.nuclearphynance.com/Show%20Post.aspx?PostIDKey=135448 )
but it still begs the question of why is the Chancellor undercutting his own treasury.

The haruspex agrees with others thinking that it is a politically inspired move to placate the legions of grey haired British savers  whose hard earned cash is earning zilch.
We should probably expect soundbites soon.

But a nagging doubt remains.
Do the crafty accountants at NS&I know something that we don't?
Are they frontrunning the treasury?
Is it time to short gilts big time?

Who knows. Too late to slaughter a pigeon.