NS&I to slash Premium Bonds prize fund rate from March draw

The Premium Bonds prize fund will be slashed from the March 2024 draw, NS&I has announced.  

The prize fund is being cut to 4.4 per cent from a 24-year high of 4.65 per cent. 

In August 2023, NS&I hiked the prize fund to 4.65 per cent from 4 per cent, a level not seen since 1999. 

Axed: The Premium Bonds prize fund is being cut from a 24-year high 4.65% to 4.4%

NS&I says the cut is due to its ‘requirement to strike a balance between the interests of our savers, taxpayers and the stability of the broader financial services sector.’

Premium Bonds savers will not see odds go down and they remain at 21,000 to 1. 

At the end of 2023, This is Money warned that savers could see National Savings and Investments cut rates on Premium Bonds prizes, as the Treasury-backed bank said it had hit its fundraising target for the year with an excess of £2.3billion. 

Much of this cash arrived from savers who ploughed into its bumper 6.2 per cent one-year fix launched in late August and pulled in early October.

Andrew Westhead, NS&I retail director, says: ‘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. 

NS&I came under fire from the savings industry for distorting the one-year fixed-rate bonds market after launching the blockbuster 6.2 per cent Guaranteed Growth and Guaranteed Income Bonds, which no other provider was able to compete with. 

NS&I is not supposed to compete with private banks so the one-year bonds’ abnormally high rate compared to the rest of the market was at odds with its promise not to compete with them. 

After the changes to the prize fund, the Premium Bonds draw in March is expected to pay out over 5.7million tax-free prizes totalling more than £444million to savers across the UK.