NS&I drastically overshot its fundraising target in the financial year ending 31 March, raising £11.3 billion against a mid-range target of £7.5 billion.
This was despite cutting the Premium Bond prize rate from 4.65% to 4.40% in September, which failed to drive the expected sell-off among savers.
It means Premium Bond holders’ chances of winning tax-free rewards have gotten drastically worse.
To recap, money invested in Premium Bonds is pooled and managed by NS&I. The bonds themselves do not pay interest. Instead, they are entered into a monthly prize draw.
Every bond number has an equal chance of winning, and prizes are awarded based on a random number generator called ERNIE (Electronic Random Number Indicator Equipment).
Since NS&I has has failed to convince Premium Bond holders to redeem their deposits, the chances of winning these tax-free rewards have been heavily diluted.
Sarah Coles, head of personal finance, Hargreaves Lansdown, said: “In the first three months of 2024, NS&I was actively trying to send savers packing.
“It cut the Premium Bond prize rate in the hope it would inspire an exodus, but it didn’t persuade enough people to leave, so it overshot its fundraising target. This doesn’t bode well for savers with Premium Bonds.
“The concern for savers is that it might be tempted to be more heavy-handed with cuts in the coming months. As the Bank of England eyes up rate cuts, savings rates have proved remarkably robust. However, we’re expecting them to fall as cuts kick in.
“Typically, NS&I will follow suit, and we can expect cuts across the range. Given that Premium Bonds make up well over half of all the money held in NS&I, they’re highly unlikely to be spared.
“And given that a modest cut earlier this year didn’t have anything like the impact it expected, we can expect NS&I to be more heavy-handed next time. It means savers may be facing a more significant cut.”