NS&I has announced a reduction in the prize fund rate for Premium Bonds from 4.15% to 4%, effective from January 2025.
The odds of winning will remain unchanged at 22,000 to 1.
Premium Bonds, a savings product backed by the UK government, provide a tax-free monthly prize draw as an alternative to traditional interest-based savings.
The January 2025 draw is expected to offer over 5.8 million prizes, totalling £432 million. This includes two £1 million prizes and over 1.8 million £25 prizes.
Andrew Westhead, NS&I retail director, said: "We carefully review our savings rates in response to changes in the broader market.
These adjustments help us meet our Net Financing target while balancing the interests of our savers, taxpayers and the wider financial services sector."
The cut comes as high-street banks begin to cut the rates they offer on traditional savings accounts.
Savings rates fell to their lowest level in over a year in October as banks started to price in lower central bank interest rates.
Average one-year fixed rate bonds in October offered the lowest since June 2023 at 4.31%, according to Moneyfacts.