NS&I to slash Premium Bonds prize fund charge from December draw

The Premium Bonds prize fund will be slashed from the December 2024 draw, National Savings and Investments has announced. 

The prize fund is being cut to 4.15 per cent from 4.4 per cent, where it has been since March 2024. 

NS&I said the change in the prize fund was in response to a ‘changing savings market’ as well as a need to not overshoot its net financing target, as set out by the Treasury. 

Grinch move: NS&I has announced it is slashing the Premium Bonds prize fund rate to 4.15% from the December draw

As a result, the odds of winning a Premium Bonds prize bonds have lengthened to 1 in 22,000. Previously the odds of any £1 bond winning a prize were 1 in 21,000. 

In August 2023, NS&I hiked the prize fund to a 24-year high of 4.65 per cent from 4 per cent, a level not seen since 1999. 

But it has been steadily falling since, with the last cut to the prize fund to 4.4 per cent from 4.65 per cent in March. 

A week ago, our savings guru Sylvia Morris predicted Premium Bonds could take a hammering in the Budget if NS&I’s fundraising target is changed.

The number of £1million jackpots remain the same, with two each month.

But there will be fewer bigger prizes of £100,000 and £50,000 in December.

NS&I says there will be 83 £100,000 prizes, five fewer than the most recent draw, and 167 £50,000 prizes, 10 fewer. 

NS&I cuts Income Bonds for first time in four years

In addition to slashing the prize fund, NS&I announced a host of rate cuts to its savings accounts. 

It will cut the rate on its Direct Saver Bonds from 4 per cent to 3.75 per cent from 20 November. 

Income Bonds will also fall to 3.75 per cent from 4 per cent. It marks the first time  NS&I has reduced interest rates for Direct Saver and Income Bonds since November 2020.

Back then, the rate was just 0.01 per cent. Income Bonds have had 11 rises since.  

NS&I has announced new issues of its two-year British Savings Bonds with a lower rate of 4.1 per cent for the guaranteed growth option and 4.09 per cent for the guaranteed income option. 

The best two-year bonds on This is Money’s independent best buy tables offer 4.6 per cent and are offered by Atom Bank and Union Bank of India.

The two-year Issues of the bonds were brought back on sale in August this year.

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 5.7million prizes worth over £435million 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 per cent HM Treasury guarantee.’