I predict more interest rate cuts on Premium Bond rates, but I’m still not selling mine! THE SAVINGS GURU

Grim news last week for the 22 million of us who enjoy the monthly thrill of checking if we’ve made a Premium Bond win – and I fear there’s more to come.

As I predicted in Money Mail and This is Money, the government-run National Savings & Investments (NS&I) is cutting the amount it pays out in prizes.

The premium rate for Premium Bonds will decrease from 4.65 percent to 4.4 percent in March. That means £30.1 million less will be paid out – with 72,022 fewer prizes.

And I predict there will be more cuts as interest rates fall. Worse still, there is a risk that interest rates will fall again before the Bank of England’s base rate starts to fall from the current 5.25 percent.

I’m holding onto mine, at least for now – although I would have done better to put it in my cash, Isa, given my winnings over the past year.

I find that Premium Bonds are great for holding money that will be needed soon, but you might as well use it until then. I use them to set aside money for biennial tax bills.

When a bill comes due, I simply sell a few and the money is in my checking account within a few days.

Better yet, gains are tax-free – unlike the interest on a standard savings account, which is taxable on the personal allowance of £1,000 for basic rate and £500 for higher rate taxpayers.

I own more bonds than are required for tax purposes, but I have no intention of selling them even if the prize money decreases. This is because they are fun, and if I sell, I miss it when my number comes up.

Why more cuts to Premium Bonds are on the way

Why am I so sure that more NS&I rate cuts are on the way?

Well, after delivering a banner year for savers, NS&I has effectively filled its bucket, so now it must prevent it from overflowing.

By cutting the prize money on its most popular product, which has a portfolio of around £125 billion, the company is trying to limit the flow of money and avoid overshooting its target.

The Ministry of Finance has asked her to deposit £7.5 billion from savers into the public purse in the financial year – from April 1 to March 31. It has a headroom of £3 billion – so it needs a maximum of £10.5 billion. But by the end of September the £9.8 billion mark had already been reached.

In September the money flowed in when the prize money was increased to 4.65pc. More came when 225,000 savers bought their 6.2 pc fixed rate bond. closed in one year.

Experts believe that if inflation continues to fall, the Bank of England will cut interest rates in an attempt to boost the economy and cool the risk of recession. If so, further cuts to prize money will follow.

Expert: Sylvia has been writing about savings deals for more than a quarter of a century

NS&I predictions – which assume there will be the same amount of money in the bonds as in January – mean there will be 5.77 million prizes in the March draw, compared to 5.84 million now.

There will still be two £1 million jackpots. The biggest hit is the £100 and £50 prizes, down from 232,182 each to 2,130,923 each. There were 2,363,105 winners of each in this month’s draw.

The number of £500 winners drops by 3,735 to 53,325 and there will be just 17,775 winners of £1,000, or 1,245 fewer than this month. The number of holders winning £5,000 also falls by 124 to 1,697, while winning £10,000 goes to 848 holders, down from 64.

For very large prizes, just 339 people will win £25,000, down from 26, the number of £50,000 will fall by 12 to 170 and £100,000 by six to 85. However, the number of £25 prizes will increase by 397,554 to 1,435,338.

Skipton’s 5.5% savings deal

Around 1.2 million savers and borrowers can earn a top 5.5 per cent on Skipton Building Society’s new easy-to-access account. You can open the Member Bonus Saver if you joined the association on or before January 11.

It gives an extra 1.7 percentage points on top of the standard Easy Access rate of 3.8 percent for one year.

There is a catch: the maximum you can put in is £3,000. But if you have that in the standard account, you can earn £51 in interest over the year by transferring it to the new account.

TSB is offering £125 to anyone who switches from a rival bank to their Spend & Save or Spend & Save Plus current account via its current account switching service

TSB’s £125 to change banks

If you want a nice payout in March and are looking for a new current account, TSB’s new switching deal may be worth considering.

It offers £125 to anyone who switches from a rival bank to their Spend & Save or Spend & Save Plus current account via the Current Account Switching Service.

You can submit your application online, in the branch or via the banking app. For the bonus, payable at the end of March, you must have at least two direct debits in the account, use your new debit card and log into the TSB mobile app before March 15.

A cash payment is a nice incentive, but in the long term other factors are more important, such as customer service, app functionality, availability of High Street branches and the terms and conditions of the overdraft.

Banks are keen to attract new current account holders because they can sell them other products once they become customers. With TSB you get access to the monthly savings account. This is a good deal as you earn a fixed amount of 6pc for a year with savings of between €25 and €250 per month.