Millions of Premium Bond holders from March will see their prize fund rate reduce.
Government-backed NS&I has announced that the Premium Bond prize rate will fall by 25 basis points from 4.65% to 4.40% from the March 2024 draw onwards. The move follows eight consecutive increases in the prize fund rate.
The prize fund rate is designed to show what an average person might win in prize money each year, presented as an example interest rate. However, there are no guarantees you’ll receive this amount, and you could win more than this – or you could win nothing at all.
The odds of winning a prize will remain at 21,000 to 1. According to NS&I, from March there will be a slight increase in the number of people who may win £25 prizes, although there will be a decrease in the number who will win all other prize amounts. For example, the number of £1,000 prizes will fall from 19,020 to 17,775, and there will be 3,735 fewer £500 prizes, bringing the total number of £500 prizes to 53,325, down from 57,060.
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.”
No changes have been announced to rates on other NS&I accounts.
Sarah Coles, head of personal finance at Hargreaves Lansdown said: “If you are considering putting money into Premium Bonds, it’s not just the cut in the interest rate that needs to be part of the decision. You also need to consider the fact that in the average month, the average bond will win nothing, so Premium Bonds will be losing money after inflation.
“Now that so many easy access accounts are keeping pace with inflation, it’s important to be aware you’re paying the price for an outside chance of winning a life-changing sum of money. For many people, the certainty of a savings rate will still hold appeal, in which case it’s worth shopping around among the smaller banks, building societies and savings platforms for the best possible rate.”
You can read more about the pros and cons of all the various accounts NS&I offers in our article National Savings & Investments products explained.
Our article Five ways to boost your savings returns explores some of the ways you might be able to make your savings work harder for you.
You may also want to read our guide Investing – the basics to find out more about whether investing some of your savings over the long term could be right for you. Bear in mind that this is only likely to be a suitable option for you if you’ve already built up a separate easily accessible pot of cash savings which you can use for any unexpected expenses, and are comfortable accepting the risks involved.
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