Savers holding Premium Bonds are set to see fewer high-value prizes awarded from April onwards, as National Savings & Investments (NS&I) cuts the prize fund rate from 4% to 3.8%.
While the odds of winning any prize remain fixed at 22,000 to one, the distribution of prizes will shift.
This reduction translates to a decrease in the estimated number of top-tier prizes.
For instance, the anticipated number of £100,000 prizes will fall from 82 in February to 78 in April.
Similarly, £50,000 prizes are projected to decrease from 164 to 157, and £25,000 prizes from 328 to 313 over the same period. The number of £10,000 prizes will also experience a dip, dropping from 820 to an estimated 781.
However, not all prize categories are shrinking. The number of £1 million jackpots will hold steady at two. Furthermore, the odds of winning a smaller £25 prize will actually improve, with the estimated number of these prizes increasing from 1,807,915 in February to 2,170,903 in April.
Overall, the total value of the Premium Bonds prize pot will shrink from approximately £430 million in February to an estimated £411 million in April. Despite this reduction in overall value, the total number of prizes awarded will remain relatively consistent, shifting from an estimated 5,864,354 in February to 5,901,229 in April.
In other NS&I news, coinciding with the approaching end of the tax year, the institution has announced adjustments to interest rates across several of its savings products. The interest rate on its Direct Isa has seen a boost, rising from 3% to 3.5% AER, effective immediately. Conversely, rates for both the Direct Saver and Income Bonds will decrease from 3.50% to 3.30% AER and from 3.49% to 3.30% AER respectively, starting March 5.
Andrew Westhead, retail director, at NS&I, which is backed by the Treasury, said: “We regularly review our products to ensure they reflect current market conditions. The changes we are making to Premium Bonds, Direct Saver and Income Bonds rates 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 5.9 million tax-free prizes worth over £411 million to be won in the April 2025 draw.”
The moves follow the recent quarter point cut in the Bank of England base rate to 4.5%.
Sarah Coles, head of personal finance, Hargreaves Lansdown said: “NS&I is testing the loyalty of its premium bond holders by slashing the prize rate to 3.8%.
“It was bound to happen, because the easy access savings market has been inching south ever since this month’s Bank of England rate cut, and NS&I will be keen not to pay more than it has to.
“It’s also slashing the rate on two of its easy access savings products. Cash Isas have dodged the scythe though, and the rate has actually risen.”
She said of Premium Bonds: “The cuts have focused on the bigger prizes, in order to keep the chances of a win the same.
“However, even then, the average bond holder will win nothing in the average month. It means your savings are likely to lose money after inflation, and with every sign that inflation is on the rise, you’ll be paying an even bigger price.
“Whenever the rate is cut it’s worth considering whether you’re still happy with the deal, or whether you’d prefer the certainty of a strong rate in the wider savings market. It’s worth checking what’s available from online banks and saving platforms, where you’ll usually find the strongest deals.”
NS&I’s announcement was made as financial information website Moneyfacts said the choice of cash savings products has reached the highest on its records going back to 2007.
It counted 2,157 savings deals in February, including Isas. There were 582 cash Isa deals available, which was also a high on Moneyfacts’ records.
Rachel Springall, a finance expert at Moneyfacts, said: “The arrival of more savings providers entering the market can encourage savers to seek new brands away from the more familiar high street banks, as new challengers are more eager to attract deposits to fund their future lending.
“However, the months ahead will be challenging for providers to keep ahead of their peers to entice new business, but also to adjust their rates as interest rates are expected to fall.”
Ms Springall added: “Savers must ensure they choose a deal which pays a competitive rate of interest but also provides a real return against the eroding impact of inflation, which is expected to rise this year.”
