NS&I issues statement over Premium Bonds rates cut

NS&I has issued a statement about changes to the prize fund rate for Premium Bonds. The provider decided to reduce the rate from this month's draw, down from 4% to 3.8%.

This followed reductions to the rate in January and in December last year, to the disappointment of savers. The odds of winning remains at 22,000 to one.

Asked why the group decided to cut the rate again, an NS&I spokesperson said: "We regularly review our products to ensure they reflect current market conditions. In response to changes in the savings market, NS&I announced in February it would be lowering the prize fund rates on Premium Bonds to 3.80% for the April draw.

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"The changes help ensure we continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector. Even with the change, more than 5.9 million prizes worth over £412million were paid out in this month’s prize draw."

With the base interest rate being dropped by the Bank of England, many savings providers have been bringing down their interest rates. Darren Mercieca, finance expert and CFO at , said he was not surprised that NS&I decided to drop the rate.

He said: "You could see it coming after the previous cuts. NS&I adjusts based on how the Bank of England moves and what’s happening across the broader savings market. If base rates fall later this year, we might see Premium Bonds take another hit, either with the prize rate or possibly even a change to the odds."

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He warned that it can be 'hit or miss' whether or not you win a prize, as he knows an investor who had £40,000 in Bonds for three years and only won £125 in that time. But he said the savings scheme could suit some people.

Mr Mercieca explained: "If someone’s a higher-rate taxpayer and already using their ISA allowance, the tax-free element matters. For people who care more about keeping their money safe than about growth, they still tick a box. It’s also popular with parents or grandparents wanting to give kids a safe place to stash money without complicating things."

Elizabeth Rivelli, personal finance and insurance expert at , said more rate cuts could be on the way for Premium Bonds. She also issued a warning about how the prize fund rate actually works: "The reality is that most people won’t come close to earning what they’d get from a regular savings account with a decent interest rate.

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"The 'rate' you hear about is just an average—plenty of people don’t win anything at all. So if your main goal is steady growth and actually seeing your savings increase over time, there are definitely stronger options.

"High-interest savings accounts are paying more right now, and fixed-term accounts give you guaranteed returns. If you’re thinking long-term and you’re comfortable taking a bit of risk, a stocks and shares ISA might give you even better returns."