Millions of Premium Bond holders from April will see their prize fund rate reduced for the third time since December last year.
Government-backed NS&I has announced that the Premium Bond prize rate will fall by 20 basis points from 4% to 3.80% from the April 2025 draw onwards. The prize fund rate changed from 4.49% to 4.15% in the December 2024 draw, and from 4.15% to 4% from the January 2025 draw.
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 22,000 to 1 in April 2025.
However, from April there will be a reduction in the number who will win larger Premium Bond prize amounts. For example, the number of £100,000 prizes will fall from 82 to 78, and there will be 7 fewer £50,000 prizes, bringing the total number of £50,000 prizes to 157 down from 164.
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.
“Premium Bond holders are highly likely to pass this loyalty test. Millions of people are prepared to hang on through thick and thin, for the chance of winning a prize – and the vanishingly small chance of winning a life changing sum of cash.
“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.”
Reductions have been announced to some NS&I accounts too, although others will see increases. For example, NS&I has raised the rate on its easy access cash ISA from 3% to 3.5% with immediate effect. However, it will reduce the rates on its Direct Saver and Income Bond accounts from 5 March.
Andrew Westhead, NS&I Retail Director, said: “At a time when many savers are reviewing their ISA plans, I’m glad we have been able to increase our Direct ISA interest rate for those wanting to make the most of their tax-free savings allowance.
“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.”
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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