National Savings & Investments (NS&I) is reducing the prize fund rate from 4% to 3.8%, starting in April. This will result in fewer high-value rewards being given to savers who own NS&I premium bonds.
Although the chances of winning any prize stay at 22,000 to one, the way awards are distributed will change.
This cut will likely result in fewer top-tier awards. For example, the expected number of awards of £100,000 will drop from 82 in February to 78 in April.
Over the same time frame, it is anticipated that the number of £50,000 prizes would drop from 164 to 157, and the number of £25,000 awards would drop from 328 to 313. Additionally, there will be fewer £10,000 prizes—an estimated 781 instead of 820. Not all reward categories are getting smaller, either.
The two £1 million jackpots will remain the same. Furthermore, since there will be more prizes overall—an anticipated 2,170,903 in April compared to 1,807,915 in February—the chances of winning a smaller £25 reward will increase.
From roughly £430 million in February to an expected £411 million in April, the Premium Bonds prize pot’s overall worth will decrease.
The total number of prizes given out will stay largely unchanged despite this decline in overall value, going from an anticipated 5,864,354 in February to 5,901,229 in April.
In other NS&I news, the institution has announced changes to interest rates on a number of its savings products, which coincides with the tax year’s end.
With immediate effect, the interest rate on its Direct Isa has increased from 3% to 3.5% AER. On the other hand, beginning March 5, rates for the Direct Saver and Income Bonds will drop from 3.50% to 3.30% AER and from 3.49% to 3.30% AER, respectively.
The actions come after the Bank of England base rate was recently lowered by a quarter per cent to 4.5%.
Customers who are 18 years of age or older and reside in the UK can open a Direct ISA, which is a cash ISA. Consumers with an NS&I Direct Saver can use their Direct Saver to pay for their Direct ISA after completing an online application. There are no penalties or notices associated with taking money out of the Direct ISA over the phone or online.
“NS&I is testing the loyalty of its premium bond holders by slashing the prize rate to 3.8%,” stated Sarah Coles, the head of personal finance at Hargreaves Lansdown.
“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”.
She further continued:” The cuts have focused on the bigger prizes, to keep the chances of a win the same.”
Coles advised checking to see whether “you’re still happy with the deal” if the rate is lowered. She also advised looking into online banks and savings platforms for better rates.
The retail director at NS&I, Andrew Westhead stated: “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.”
