Millions of Premium Bond holders from December will see their prize fund rate reduced.
Government-backed NS&I has announced that the Premium Bond prize rate will fall by 25 basis points from 4.40% to 4.15% from the December 2024 draw onwards. The prize fund rate was last changed in March 2024.
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 reduce to 22,000 to 1, down from 21,000 to 1 in December. Andrew Westhead, NS&I Retail Director, said: “As the savings market continues to change, we need to lower the rates on some of our products to help us meet our Net Financing target, while also ensuring we continue to balance the interests of our savers, taxpayers and the broader financial services sector.
“Even with the changes, we’re still expecting to pay out over 5.7 million prizes worth over £435 million in the December Premium Bonds draw. Our portfolio of both fixed and variable rate products, plus the unique position of Premium Bonds, continues to give savers the choices they need to help reach their savings goals, backed by the safety and security of our 100% HM Treasury guarantee.”
However, from December there will be a decrease in the number who will win all Premium Bond prize amounts. For example, the number of £1,000 prizes will fall from 18,452 to 17,426, and there will be 3,078 fewer £500 prizes, bringing the total number of £500 prizes to 52,278, down from 55,356..
Sarah Coles, head of personal finance at Hargreaves Lansdown said: “A hefty prize tends to persuade us to overestimate the chances of winning when we’re considering whether or not to take a punt. Usually this is offset by the cost of losing our stake, but because this doesn’t happen with Premium Bonds, it can feel like we’re not paying a price.
“However, the price you pay is just harder to spot – because you’re giving up the interest you could have earned elsewhere. If you put £1,000 away now and get an average of 3% on your savings over the next ten years, you’d make almost £350. If you left it in Premium Bonds and won nothing, you’d have missed out on all this potential interest.
“In order to decide whether Premium Bonds are the best option, you need to drag this cost to the forefront of your mind, and consider whether the near certainty of losing money after inflation is worth the chance you’ll be unusually lucky. If this persuades you to look elsewhere for reliable returns in a competitive easy access savings account, it’s worth considering online accounts and cash ISAs, and online cash savings platforms. These tend to offer much better rates than those available with high street banks, and the range of easy access deals available has grown dramatically over the years.”
Reductions have been announced to other NS&I accounts too. For example, rates on its Direct Saver account and Income Bonds will fall with effect from 22 November 2024. This is the first time that NS&I has reduced interest rates on these accounts since November 2020. The Direct Saver account from November will pay savers 3.75% gross, down from 4% currently, and Income Bonds will pay 3.69% gross, down from 4% gross.
New Issues of 2-year British Savings Bonds have gone on sale offering a lower rate of 4.10% gross for the Guaranteed Growth option and 4.02% gross for the Guaranteed Income option. These rates are down from 4.25% and 4.17% gross respectively.
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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