More cuts to the Premium Bonds prize fund rate could be on the way this year as NS&I announces a fresh reduction in the rate.
The provider has said the rate will drop from the current 4% to 3.8% from the April draw. This follows the rate tumbling twice already in recent months, dropping from 4.4% to 4.15% in December, and then down to the current level in January.
This means there will be fewer prizes on offer in the monthly draw on average from April, although the odds of winning will remain at 22,000 to one.
Looking ahead, Darren Mercieca, finance expert at Kiwi Bets, said further reductions could be on the way in the month’s ahead.
He said: “There’s certainly a possibility that the prize fund rate could be adjusted again, especially if economic conditions shift. In the past, the rate has fluctuated based on market conditions, so it wouldn’t be surprising if further cuts happen, but no one can say for sure.”
In announcing the new rates, NS&I Retail Director Andrew Westhead said they would “enable us to continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector”.
He explained: “Even with the change to the Premium Bonds prize fund rate, we are expecting more than 5.9 million tax-free prizes worth over £411million to be won in the April 2025 draw.”
Mr Mercieca said he thinks if the prize fund rate cuts continue, it could drop to 3.5% or even lower. In light of the changes, he encouraged customers to make sure they have backup saving plans.
Look at alternatives to Premium Bonds, he said: “A high-interest savings account or a fixed-rate bond, which locks in a guaranteed return, may be better options for anyone thinking about cashing in their Premium Bonds.
“Peer-to-peer lending platforms and stocks and shares ISAs may provide greater profits if they’re seeking something a little more active, but the risk is higher.”
But he also encouraged people to think about their particular financial objectives and their risk tolerance before moving their money around.
He added: “The main conclusion is that there are other options available that can yield higher profits given the rising interest rates.”
Prizes in the monthly Premium Bonds draw range from just £25 up to the £1million jackpot, with other large cash prizes for £100,000 and £50,000 in the pot.
Matthew Parden, CEO of Marygold & Co, said the prize fund rate can be deceptive, explaining: “This can be a misleading percentage as it very much depends on how much you have invested, the maximum being £50,000.”
He said you need to have at least £10,000 or £20,000 invested to have a decent chance of winning a prize.
