NS&I announces Premium Bond prize rate cut
NS&I, the government-backed savings provider, has announced it will cut the Premium Bond prize rate from four per cent to 3.8 per cent in April.
The rate had already decreased from 4.15 per cent to four per cent at the beginning of the year.
More than 24m people own Premium Bonds, making it the nation’s most popular form of savings.
However, following the recent reductions in the prize rate, Premium Bonds have become a less attractive option for savers, especially when compared to other savings accounts.
The best rate on offer at the moment is Plum’s easy access Cash ISA. The account offers an interest rate of 5.05 per cent despite the recent cuts to the base rate by the Bank of England.
Andrew Westhead, NS&I Retail Director, said: “The changes we are making to Premium Bonds… enable us to continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector.
“Even with the change to the Premium Bonds prize fund rate, we are expecting more than 5.9m tax-free prizes worth over £411m to be won in the April 2025 draw.”
Between £25 and £50,000 can be deposited in Premium Bonds, and the prize draw is conducted once a month. Winners are randomly selected, and an individual’s chances of winning are increased by the number of bonds they own.
Prizes range from £1m to £25. NS&I have cut the prize rate by increasing the number of £25 prizes and decreasing the number of £50 prizes, meaning the odds of winning remain 22,000 to one.
Laura Suter, director of personal finance at AJ Bell said: “Savers with money in Premium Bonds should take a step back and consider whether they’re really getting the best deal. While the prize draw element is appealing, the reality is that many Premium Bond holders will never win a prize, and the average return is far lower than what’s available in the top easy-access savings accounts. For those who want certainty on their returns, a traditional savings account could be a smarter choice.
“A previous Freedom of Information request obtained by AJ Bell revealed that two-thirds of Premium Bond holders, equivalent to nearly 14.4m people, have never won a single prize. Among the 5.3m who did win between June 2023 and May 2024, the average holding was £23,047, and 80 per cent of those winners received multiple prizes. In contrast, the average balance of those who didn’t win was just £175, suggesting that those with smaller amounts are far less likely to see any returns.”