- The Treasury-backed savings bank also cut the prize fund rate last month
The Premium Bonds prize fund rate will be slashed from the January 2025 draw, National Savings and Investments has announced.
The prize fund rate, which represents the average return a Premium Bonds saver would get in a year, is being cut to 4 per cent from 4.15 per cent.
It comes as just a month after NS&I announced it would cut the prize fund rate to 4.15 per cent in a blow to savers.
The odds of winning a Premium Bonds prize will remain at 22,000 to 1. They lengthened from 21,000 to 1 when NS&I announced the prize fund rate was being cut to 4.15 per cent.Â
Instead of paying a monthly or annual interest rate, Premium Bonds holders have the chance to win monthly prizes from £25 all the way up to £1million.Â
Down: The Premium Bonds prize fund has once again been cut. It will sit at 4% from January 2025 after being cut to 4.15% last month
What does this mean for Premium Bonds prizes?
The number of £1million jackpots will remain the same in January, with two each month.
But there will be fewer bigger prizes of £100,000 and £50,000.
Overall there will be more smaller prizes of £25, rising to 1.8million in the January 2025 draw from 1.5million in November 2024.
NS&I says there will be 82 £100,000 prizes, seven fewer than the most recent draw, and 166 £50,000 prizes, 11 fewer than November’s draw.
NS&I once again said the change in the prize fund rate was in response to ‘changes in the savings market’ as well as a need to not overshoot its net financing target, as set out by the Treasury.
Earlier in November, NS&I announced it had raised £3.3billion in the current financial year.
It has a net financing target for 2024/25 of£9billion, with wiggle room of plus or minus £4billion.
It is a sign of the times for the savings market as a wave of providers moved to cut saving rates since the Bank of England cut the base rate to 4.75 per cent from 5 per cent.
Laura Suter, director of personal finance at AJ Bell said: ‘NS&I has joined the troops of other savings providers cutting interest rates, as the savings market cools after a bonanza couple of years.’
In August 2023, NS&I hiked the Premium Bonds prize fund rate to a 24-year high of 4.65 per cent from 4 per cent, a level not seen since 1999.
But it has been steadily falling since. Before December’s cut to 4.15 per cent, the last cut to the prize fund to 4.4 per cent from 4.65 per cent in March this year.
NS&I cuts Income Bonds rates
In addition to slashing the prize fund, NS&I announced a host of rate cuts to its other savings accounts.
It will cut the rate on its Direct Saver Bonds from 3.75 per cent to 3.5 per cent from 20 December.
Income Bonds will also fall to 3.49 per cent from 3.75 per cent.
In October NS&I cut interest rates for Direct Saver Bonds and Income Bonds for the first time since November 2020.
Direct Saver Bonds and Income Bonds were both cut to 3.75 per cent from 4 per cent.
In November 2020, the rate was just 0.01 per cent. Income Bonds have had 11 rises since.
 Anyone with money in easy-access NS&I accounts should weigh up whether they would be better switching to a rival to clinch some extra interest
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.’
Suter said: ‘The rates are now significantly below the top rates in the market, meaning savers are paying a decent premium for the safety and brand name of NS&I.
‘Anyone with money in easy-access NS&I accounts should weigh up whether they would be better switching to a rival to clinch some extra interest.’
Prizes won through the Premium Bonds prize draw are tax free unlike money kept in a savings account which is one of the appeals to savers.
Any money held in Premium Bonds is backed by the 100 per cent Government guarantee while money kept in regular saving accounts is protected up to £85,000 under the Financial Services Compensations Scheme.
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