NS&I has announced it will be reducing the Premium Bonds prize fund rate from the March 2024 draw.
The prize fund rate will drop from 4.65 percent to 4.4 percent, but the odds of any £1 Bond number winning a prize will remain the same at 21,000 to one.
Andrew Westhead, NS&I retail director, said: “These changes reflect our requirement to strike a balance between the interests of our savers, taxpayers and the stability of the broader financial services sector.
“In a dynamic savings market, it’s important that our rates are set at an appropriate position against those of our competitors as we work towards meeting our annual Net Financing target.
“After these changes, the Premium Bonds draw in March is expected to pay out over 5.7 million tax-free prizes totalling more than £444 million to savers across the UK.”
The change compares to the March 2023 draw when the prize fund rate was 3.3 percent and the odds were 24,000 to one.
Laura Suter, director of personal finance at AJ Bell, said the cut was the “biggest sign yet that the rate bonanza enjoyed by savers is coming to an end”.
Ms Suter said: “The Government-backed provider has been increasing the prize fund on Premium Bonds consistently since 2022 as Base Rate rose and the saving war heated up. But that has reached its peak.
“[NS&I] will likely continue to bring rates down from here in small increments, as it gauges the popularity of Premium Bonds when savings rates are falling.”
However, Ms Suter noted: “The 4.4 percent expected prize fund on offer is still above where Premium Bond rates were in August last year, when they hit a 23-year high, and when this cut kicks in the rate will still remain significantly above the 3.3 percent on offer in March last year.”
Premium Bonds were launched in 1956 as a “unique way” to save. Instead of earning interest, each £1 Bond is entered into a monthly prize draw with the chance to win tax-free prizes ranging from £25 to two £1million jackpots.
Over 5.8 million prizes worth over £475million were drawn in the January 2024 draw.
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