Premium Bond holders will face reduced chances of winning prizes from the April draw, following changes announced by savings giant NS&I.
The National Savings and Investments prize fund rate is set to decrease from 3.60% to 3.30%. Concurrently, the odds of winning any prize will lengthen, moving from 22,000 to one to 23,000 to one, NS&I confirmed.
Backed by the Treasury, NS&I stated its duty to balance the interests of its savers, taxpayers, and the market, alongside meeting annual targets for raising net finance for the government.
Andrew Westhead, NS&I retail director, said: “This change to the Premium Bonds prize fund rate and odds reflects changes in the wider savings market, and ensures we continue to balance the interests of savers, taxpayers and the wider financial services sector.
“Premium Bonds continue to be the most popular UK savings account.
“Having recently passed £40 billion in prizes drawn, the April draw is expected to have close to six million tax-free prizes worth around £375 million.
“Launched 70 years ago in November 1956, Premium Bonds maintain their unique appeal by offering 100% security, the flexibility to withdraw easily and the excitement of potentially winning a tax-free prize each month.”
The Bank of England base rate was reduced in December, in a blow to savers, and further reductions are expected.
Instead of paying interest, Premium Bonds offer savers an annual prize fund rate that funds the monthly draw for tax-free prizes.
Each £1 bond purchased is entered into a monthly draw, where prizes range from £25 to £1 million.
The estimated number of £1 million prizes is set to remain unchanged in April, at two.
The estimated number of £100,000 prizes is expected to fall to 71 in April, from 78 in February.
NS&I also said the number of £50,000 prizes will fall from 154 in February to an estimated 143 in April.
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There will be around 284 prizes worth £25,000 in April, down from 311 in February.
The estimated number of £10,000 prizes will fall from 777 to 712 over the same period.
The number of £25 prizes will go up, with around 2,806,003 predicted for April, compared with 2,643,007 in February.
The total number of prizes in April will be around 5,943,029, down from 6,183,066 in February.
People can hold up to £50,000 in Premium Bonds, including those aged under 16.
Nine out of 10 prizes are paid directly into the holder’s nominated bank account or automatically reinvested into Premium Bonds to go into the next draw, NS&I said.
New Premium Bond purchases need to be held for one full calendar month before being entered into the monthly prize draw.
Laura Suter, director of personal finance at AJ Bell, said: “The Premium Bond ‘prize fund rate’ is intended to give savers some comparison with how the account compares to normal savings accounts.”
But she said: “Clearly not everyone has ‘average’ luck, otherwise the prizes would be handed out equally to every saver.
“The fact that there are some very large prizes also skews the figures.”
Ms Suter added: “Savers with money in Premium Bonds should really think about whether the account is right for them.
“Considering many Premium Bond holders will never win a prize and the average expected return is lower than the top easy access account, savers could well be better off with a guaranteed return elsewhere.
“Despite interest rate cuts, these accounts are still likely to continue to be very popular as they are backed by NS&I, and many savers have huge brand loyalty to the organisation.”