- NS&I reduces the premium interest rate for Premium Bonds from 4.65% to 4.4%
- The reduction will take effect from the March 2024 prize draw
- Experts warned last year that NS&I’s frozen fundraising targets could mean cuts
The prize money for Premium Bonds will be reduced from the March 2024 draw, NS&I has announced.
The prize money will be reduced from 4.65 percent to 4.4 percent in 24 years.
In August 2023, NS&I increased the prize money from 4 percent to 4.65 percent, a level not seen since 1999.
Axed: The Premium Bonds prize fund is cut from a 24-year high of 4.65% to 4.4%
NS&I says the cut is due to the ‘requirement to balance the interests of our savers, taxpayers and the stability of the wider financial services sector.’
Premium Bond savers will not see the odds drop and remain at 21,000 to 1.
In late 2023, This is Money warned that savers could see National Savings and Investments cut rates on premium bonds, as the Treasury-backed bank said it had met its fundraising target for the year with a surplus of £2.3 billion.
Much of this money came from savers clinging to the 6.2 percent one-year premium launched at the end of August and withdrawn in early October.
Andrew Westhead, NS&I retail director, said: “In a dynamic savings market, it is important that our rates are set appropriately against our competitors as we strive to achieve our annual net funding target.
NS&I came under fire from the savings sector for disrupting the one-year fixed rate bond market after launching the blockbuster 6.2 per cent guaranteed growth and guaranteed income bonds, which no other provider could compete with.
NS&I is not intended to compete with private banks. So the abnormally high yields on one-year bonds compared to the rest of the market contradicted the commitment not to compete with them.
Following the changes to the prize fund, March’s Premium Bonds draw is expected to pay out more than 5.7 million tax-free prizes, with a total award of more than £444 million to savers across the UK.