NS&I interest rate cuts hit easy-access savers as premium bonds stay at 3.60%
NS&I interest rate cuts are set to lower returns for two of its best-known easy-access accounts, reshaping how many UK savers compare cash options in early 2026. The rate changes apply to Direct Saver and Income Bonds, with the new rates scheduled to take effect on February 12, 2026 ET. At the same time, premium bonds remain tied to a separate prize-based system that can look attractive in falling-rate markets, even though outcomes are never guaranteed.
What is being cut and the dates that matter
NS&I has confirmed it will reduce the interest rates on Direct Saver and Income Bonds from February 12, 2026 ET. Direct Saver will move to 3.05% gross AER, down from 3.30% gross AER. Income Bonds will move to 3.01% gross and 3.05% AER, down from 3.26% gross and 3.30% AER.
NS&I described the move as reflecting shifts in the wider savings market and noted this is the first change to these account rates since March 5, 2025 ET. It also linked the decision to its government-set net financing target for the 2025 to 2026 year, a framework that governs how much funding it aims to raise for the Treasury across its product range.
The reason for the change has not been stated publicly beyond market conditions and target-setting. A full public timeline has not been released for any additional rate reviews after the February 12, 2026 ET change date.
Where premium bonds fit in as cash rates drift lower
Premium bonds often become a headline topic whenever NS&I trims conventional savings rates, because they sit outside the usual interest-rate promise. Instead of paying interest, premium bonds enter each eligible bond number into a monthly draw for tax-free prizes, with prizes ranging from small amounts to a top jackpot.
As of late January 2026 ET, the premium bonds annual prize fund rate is listed at 3.60% and the odds are 22,000 to 1 for each £1 bond number. That prize fund rate is variable, meaning it can change, and it does not mean every holder will receive a 3.60% return. Some people will win more than that in a year, many will win less, and some will win nothing.
NS&I has not announced a new premium bonds prize fund rate change alongside the February 2026 cuts to Direct Saver and Income Bonds, so the immediate update is centered on easy-access interest accounts rather than the prize draw.
How NS&I rates and premium bonds returns typically work
NS&I products are backed by HM Treasury, but the pricing logic still follows market reality. When the Bank of England lowers Bank Rate, the wider savings market tends to move gradually in the same direction as providers compete for deposits while protecting margins. The Bank of England cut Bank Rate to 3.75% on December 18, 2025 ET, part of a series of cuts that began in 2024, and that shift has been filtering through to savings rates into 2026.
Premium bonds work differently from a savings account because the “return” is distributed as prizes from a monthly prize fund, not credited as interest. The prize fund rate is an annualized figure used to set the size of that pool across all eligible holdings, while the published odds describe the chance that any single £1 bond number wins in a given month. Because prizes are unevenly distributed, the experience for a person holding a small amount can be wildly different from someone holding the maximum, and even large holders can see results vary from year to year.
That difference in mechanism matters in a period of NS&I interest rate cuts: a guaranteed interest rate is predictable but may fall quickly in a softening market, while a prize-based product can feel resilient on paper but still delivers uncertain, lumpy outcomes in practice.
Who is affected and what the next milestones are
Two groups feel the impact immediately: Direct Saver and Income Bonds customers, who will earn less from February 12, 2026 ET, and premium bonds holders, who will keep participating under the current prize fund settings unless NS&I later changes the rate or odds. A third group sits behind the scenes: taxpayers and the broader savings sector, because NS&I explicitly aims to balance saver value with government financing goals and competition across banks and building societies.
In practical terms, the rate cuts can matter most to people using these accounts as emergency funds or short-term cash parking, where every tenth of a percent affects interest earned over a year. For premium bonds holders, the key takeaway is unchanged: prizes are tax-free and government-backed, but there is no promised yield, so outcomes depend on luck and holding size.
The next near-term milestones are clear and verifiable: the NS&I rate changes take effect on February 12, 2026 ET, and the Bank of England’s next scheduled interest-rate decision is on February 5, 2026 ET. Those two dates will help shape whether the early-2026 trend in savings rates continues downward and whether premium bonds remain positioned as a popular alternative for cash savers.
