Premium Bonds: NS&I to cut premium bonds prize fund to 3.3% and shrink big-prize chances from April

NS&I will cut the Premium Bonds annual prize-fund rate to 3. 3% from 3. 6% for the April draw and beyond, and lengthen the odds of any single bond winning from 1 in 22, 000 to 1 in 23, 000. The change reduces the number of larger tax-free prizes available in the April draw and matters for savers weighing the randomness of prize draws against guaranteed interest.

Prize-fund rate and odds: how the April change fits recent cuts

The cut to 3. 3% follows a series of reductions last year that took the prize-fund rate from 4% in January to 3. 6% by August. The odds of a win have been the same since December 2024 but will be lengthened to 1 in 23, 000 for the April draw and beyond. NS&I has said the new rate applies from the April draw and onwards.

Fewer big prizes in April — most prize tiers fall, small prizes rise

The April draw is estimated to include around 5, 943, 029 prizes, down from 6, 183, 066 in February, with close to six million tax-free prizes worth around £375 million expected in April. The number of £1 million prizes is set to remain unchanged at two. Estimated £100, 000 prizes will fall to 71 in April from 78 in February, £50, 000 prizes are expected to fall from 154 to 143, £25, 000 prizes from 311 to around 284, and £10, 000 prizes from 777 to 712. By contrast, the number of £25 prizes is predicted to rise to about 2, 806, 003 in April from 2, 643, 007 in February. NS&I has recently passed £40 billion in prizes drawn overall.

NS&I’s position: Treasury backing, finance targets and Andrew Westhead’s explanation

NS&I, which is backed by the Treasury, has a duty to balance the interests of savers, taxpayers and the market and is set targets for the amount of net finance it needs to raise each year for government. Andrew Westhead, NS&I retail director, said the change to the prize-fund rate and odds reflects changes in the wider savings market and ensures NS&I continues to balance the interests of savers, taxpayers and the wider financial services sector. Westhead added that Premium Bonds continue to be the most popular UK savings account and noted that the product was launched 70 years ago in November 1956.

Why some savers may stick with Premium Bonds despite lower odds

Premium Bonds maintain appeal for some because prizes are tax-free, the product offers 100% security and the flexibility to withdraw easily, and there is the excitement of potentially winning a tax-free prize each month. Each £1 bond purchased is entered into a monthly draw where prizes range from £25 to £1 million. People can hold up to £50, 000 in Premium Bonds, including accounts held for those aged under 16.

How the cut compares with interest rates, tax allowances and ISAs

The new prize-fund rate of 3. 3% sits below current headline savings rates cited for standard accounts: the top easy-access non-ISA rate of 4. 5% would pay £45 in interest a year for every £1, 000 saved, and the top easy-access cash ISA rate is currently 4. 4%. That cash ISA rate is slightly lower than the standard non-ISA rate but is tax-free and, as noted, higher than the current Premium Bond prize rate of 3. 6% that is being reduced. With normal savings, interest is taxable but each tax year savers have a personal savings allowance: basic 20% rate taxpayers do not pay tax on the first £1, 000 of interest, higher 40% rate taxpayers do not pay tax on the first £500, and top 45% rate taxpayers pay tax on all interest. At a 4. 5% rate it takes just over £22, 222 in savings for a basic-rate taxpayer to exceed the allowance and just over £11, 111 for a higher-rate taxpayer.

Practical takeaway for holders and potential investors

Most people with typical luck are unlikely to achieve the headline prize-fund return — whether 3. 6% or the new 3. 3% — even with the maximum £50, 000 invested. That means for many savers, accounts that pay interest and offer a guaranteed return are now more likely to outpace what an average Premium Bonds holder will receive. Still, if you have larger cash savings, have already used a £20, 000-a-year ISA allowance and can accept the random nature of prize draws, Premium Bonds remain a viable option because prizes are tax-free. For others, cash ISAs or interest-paying accounts are likely to be the better choice, particularly given recent cuts elsewhere in the market and the Bank of England base rate having been reduced in December with further reductions expected.