Premium Bonds holders have been alerted that the odds of in the monthly prize draw may well take another nosedive, following NS&I’s announcement of a reduction in the prize fund rate. Starting from the December draw, the rate will be slashed from 4.4 percent to 4.15 percent, and the odds for each £1 Bond will also plummet, dropping from 21,000 to one, to 22,000 to one.
This cutback will result in roughly 260,000 fewer prizes in the December draw compared to October, although the two £1million jackpot prizes will still be up for grabs. Steven Kibbel, financial planner and chief editorial advisor at Gold IRA Companies, warned Premium Bond savers that they “can’t count on them as a solid way to grow your savings anymore”.
He explained the current situation: “We’ve already seen cuts, and more could follow. NS&I adjusts its rates depending on a lot of factors, and they’re not immune to the economic shifts we’re all dealing with.”
He encouraged people to review where their savings are invested, stating: “It’s smart to keep an eye on alternatives and spread out where you put your money. Relying on Premium Bonds alone doesn’t cut it for most people these days. You want stability, and unfortunately, Premium Bonds just aren’t offering that right now.”
The monthly prize draw selects winning Bonds randomly, with each £1 Bond having an equal chance of winning. Prizes vary from £25 up to £1million, with several large cash prizes for £100,000 and £50,000.
As the savings provider announced the cut, NS&I’s Retail Director Andrew Westhead stated: “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 5.7 million prizes worth over £435million in the December Premium Bonds draw.”
NS&I is also reducing other rates, with the interest rate on its Direct Saver and Income Bonds to fall starting November 20, falling from 4 percent to 3.75 percent.
Mr Kibbel shared some tips for those re-thinking their savings strategy: “People should consider where they are in life and what their savings goals are. If you’re after long-term growth, focus on accounts that guarantee returns. If you’re okay with a little uncertainty, then maybe keep some money in Premium Bonds, but I wouldn’t bet on them being your main savings vehicle anymore.”
NS&I is also dropping the rates on its British Savings Bonds. This includes the rate for Guaranteed Growth Bonds now at 4.1 percent, down from 4.25 percent, while Guaranteed Income Bonds will yield 4.02 percent instead of the former 4.17 percent.
Sarah Coles, head of personal finance at Hargreaves Lansdown, has warned the relatively fresh British Savings Bond might be on their last legs given the current shifts in the market. She warned: “They’ve only been on sale since August, and at this rate their days may be numbered. You can do far better elsewhere, with the best on the market offering 4.6 percent.
“And while the Treasury guarantee of your savings and the attraction of the brand will go a long way, for plenty of people it’s not going to makeup enough ground. These bonds look unlikely to shake or stir anyone.”