Ns&i Premium Bonds Rate Change: prize-fund rate cut to 3.3% from April and what it means
NS&I will cut its Premium Bond prize-fund rate to 3. 3% from 3. 6% for the April draw and beyond, a ns&i premium bonds rate change that reduces both the headline return and the odds of winning. The move tightens the choice for savers weighing tax-free, chance-based prizes against guaranteed interest rates.
Ns&i Premium Bonds Rate Change: what the April cut actually does
The prize-fund rate — the nearest thing Premium Bonds have to an interest rate — is decreasing from 3. 6% to 3. 3% for the April draw and beyond. Premium Bonds operate as a monthly draw rather than paying interest, and prizes on offer range from £25 to £1 million. The annual prize-fund rate is a benchmark of the average return you might get, though actual outcomes vary widely.
Odds shift and the reductions that led here
The odds of any single bond winning a prize, which have been the same since December 2024, are dropping slightly from 1 in 22, 000 to 1 in 23, 000. This latest cut follows a series of reductions last year that took the prize-fund rate from 4% in January to 3. 6% by August before the current fall to 3. 3%.
How guaranteed easy-access rates stack up against Premium Bonds
For many savers with average luck, accounts that pay interest will now be even more likely to beat Premium Bonds. The top easy-access standard (non-ISA) rate cited is 4. 5%, which would pay £45 in interest a year for every £1, 000 saved. The top easy-access cash ISA rate is given as 4. 4% — slightly lower than the standard non-ISA rate but tax-free and presented as offering a guaranteed return that is higher than the current Premium Bond prize rate of 3. 6% (and higher than the new 3. 3% prize-fund rate coming in April).
Tax allowances, thresholds and the case for prizes over interest
Premium Bond prizes are not taxed. By contrast, interest on normal savings is taxable as income, though each tax year savers receive a personal savings allowance (PSA): basic 20% rate taxpayers do not pay tax on the first £1, 000 a year of interest; higher 40% rate taxpayers do not pay tax on the first £500 a year of interest; top 45% rate taxpayers pay tax on all interest. With the top standard non-ISA easy-access rate of 4. 5%, it takes just over £22, 222 in savings for basic-rate taxpayers to exceed the allowance and start paying tax on interest, and just over £11, 111 for higher-rate taxpayers. If someone has larger cash savings, has already maxed out a £20, 000 a year ISA allowance and would otherwise exceed the PSA, Premium Bonds can be a reasonable choice because the prizes are tax-free—provided the saver accepts the random nature of returns.
Who might still keep money in Premium Bonds and common misconceptions
Many people still keep their cash in Premium Bonds, but it is important to bear in mind that most people with typical luck will not get a return equal to the headline prize-fund rate (3. 6% or 3. 3%), even with the maximum £50, 000 invested. A common belief is that you’re likely to get the prize rate or thereabouts and that there is a small chance of winning £1 million; that expectation is misleading. In reality, you are likely to get quite a lot less than the headline prize rate and there is a negligible chance of winning the top prize. If a saver knows and accepts that, investing in Premium Bonds isn't a bad plan; for everyone else, cash ISAs are still likely to be the better choice.
Practical takeaways for savers facing the ns&i premium bonds rate change
The ns&i premium bonds rate change cuts the headline prize-fund rate to 3. 3% and slightly reduces the odds of winning, following last year’s decline from 4% in January to 3. 6% by August. Savers should compare the new prize-fund rate and the reduced odds with guaranteed easy-access rates of 4. 5% (standard) and 4. 4% (cash ISA), factor in personal savings allowance thresholds and ISA limits, and decide whether they accept random, tax-free prizes or prefer a predictable interest return.
