Analysts are issuing a warning to Premium Bond holders following looming changes to the savings products from National Savings and Investments (NS&I) National Savings and Investments (NS&I) which will take place later this year.
The financial institution has announced its Premium Bonds prize fund rate will decrease to 3.8 per cent from April 2025, down from the current four per cent.
Despite this change, NS&I has stated that the odds of winning will remain unchanged at 22,000 to 1 for each £1 Bond held.
The rate change comes as part of wider adjustments to NS&I's product range, which includes reduced interest rates for Direct Saver and Income Bonds from March 5, 2025.
NS&I has also announced an immediate increase to its Direct ISA rate, which will rise to 3.5 per cent AER from three per cent AER.
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Savings experts are issuing a warning to Premium Bonds holders
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Savings experts have warned that Premium Bonds holders with less than £10,000 invested may face long waits between prizes.
Matthew Parden, the CEO of Marygold & Co, explained: "This can be a misleading percentage as it very much depends on how much you have invested, the maximum being £50,000."
Using a £1,000 investment example, Parden noted: "The annual return using the average rate would be £40. But given the odds of winning a prize are 22,000 to 1, it would take 22 months before a prize is likely to be won.
"To have a decent chance of winning prizes regularly, savers should be holding at least £10,000 to £20,000 in Bonds."
Premium Bonds savers can check if they have won via the NS&I Premium Bonds prize checker app or website NSIThe April 2025 Premium Bonds draw is set to feature a prize fund of over £411million with more than 5.9 million prizes will be available in the upcoming draw.
Unlike normal savings products, Premium Bonds does not have accrue interest in a traditional way with holders being enrolled into a monthly prize draw.
These prizes will range from two £1m jackpots at the top end to over 2.1 million £25 prizes at the lower end.
Despite the rate reduction, Premium Bonds remain particularly attractive for higher-rate taxpayers, according to savings experts.
Parden highlighted the tax advantages: "For a 45 per cent taxpayer (someone who earns over £125,140) a 3.8 per cent return would be the equivalent to a gross return of 6.91 per cent.
"For a higher rate taxpayer (someone earning over £50,271) the equivalent gross rate would 6.33 per cent - that's not unattractive if you're lucky enough to be a higher earner."
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NS&I also offers an ISA product to customers
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On the changes to ISA rates, Andrew Westhead, NS&I Retail Director, said: "At a time when many savers are reviewing their ISA plans, I’m glad we have been able to increase our Direct ISA interest rate for those wanting to make the most of their tax-free savings allowance.
"We regularly review our products to ensure they reflect current market conditions. The changes we are making to Premium Bonds, Direct Saver and Income Bonds rates enable us to continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector.
"Even with the change to the Premium Bonds prize fund rate, we are expecting more than 5.9 million tax-free prizes worth over £411million to be won in the April 2025 draw.”
