Premium Bonds are set to become less premium after NS&I announced a reduction in the prize rate from 4.4% to 4.15%, with the new rate set to take effect for the December 2024 draw.
At the same time, the odds of winning will worsen, changing from 21,000:1 to 22,000:1. This marks the first reduction in the prize rate since March 2024.
Andrew Westhead, NS&I’s retail director, said: “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.”
In addition to the changes to Premium Bonds, NS&I will also lower interest rates on its Direct Saver and Income Bonds from 20 November 2024.
The Direct Saver will now offer 3.75% gross/AER, down from the previous rate, while Income Bonds will drop to 3.69% gross (3.75% AER).
Sarah Coles, head of personal finance at Hargreaves Lansdown, stated that Premium Bonds have met “the business end of the savings rate scythe”.
She said: “Like any horrible news, it doesn’t make it any easier that we knew this was coming… as NS&I has followed the rest of the easy access savings market by cutting the chances of a win.”
NS&I also launched new two-year British Savings Bonds on 22 October 2024, which offer lower rates than before. The Guaranteed Growth Bond is now at 4.10% gross/AER, and the Guaranteed Income Bond at 4.02% gross/4.09% AER. These bonds had previously offered higher returns.