Premium Bonds prize rate cut to 3.3% and big-prize numbers fall from April draw
NS&I will reduce the Premium Bonds annual prize-fund rate to 3. 3% from April and lengthen the odds of any single bond winning from 1 in 22, 000 to 1 in 23, 000. The move matters because it both lowers the headline benchmark return and shrinks the number of large tax-free prizes available at the April draw, altering the product’s competitiveness with interest-paying accounts and ISAs.
NS&I and Treasury objectives behind the decision
NS&I, which is backed by the Treasury, has a statutory duty to balance the interests of savers, taxpayers and the wider financial services market and is set targets for the amount of net finance it needs to raise for government each year. Andrew Westhead, NS&I retail director, said the change to the prize-fund rate and odds reflects movements in the wider savings market and is intended to preserve that balance. He added that Premium Bonds remain the most popular UK savings account and highlighted their security and withdrawal flexibility.
Premium Bonds prize changes
The annual prize-fund rate will fall from 3. 6% to 3. 3% for the April draw and beyond. The odds of a single £1 bond winning a prize will move from one in 22, 000 to one in 23, 000. NS&I describes the prize-fund as the nearest thing Premium Bonds have to an interest rate; it funds monthly tax-free draws where prizes range from £25 to £1 million.
April draw prize counts and overall prize pot
Having passed £40 billion in prizes drawn, NS&I expects the April draw to deliver close to six million tax-free prizes worth around £375 million. The estimate keeps the number of £1 million prizes unchanged at two. However, the number of large prizes will fall across several tiers: estimated £100, 000 prizes drop to 71 in April from 78 in February; £50, 000 prizes fall from 154 to an estimated 143; £25, 000 prizes are expected to be about 284 in April, down from 311 in February; and £10, 000 prizes decline from 777 to 712. By contrast, the number of £25 prizes will rise to around 2, 806, 003 in April from 2, 643, 007 in February. The total number of prizes in April is forecast at about 5, 943, 029, down from 6, 183, 066 in February.
Odds, prize tiers and historical context
Each £1 bond purchased is entered into the monthly draw. Premium Bonds were launched in November 1956 and mark 70 years since their introduction. A series of reductions over the past year took the prize-fund rate from 4% in January to 3. 6% by August, and the latest adjustment drops it further to 3. 3%.
Impact for savers: taxable interest, ISAs and account comparisons
For many savers with average luck, interest-paying accounts are now more likely to outperform Premium Bonds’ headline prize-fund. The top standard (non-ISA) easy-access rate cited is 4. 5%, which would yield £45 of interest a year for every £1, 000 saved. That rate means basic-rate (20%) taxpayers would begin to exceed their personal savings allowance on interest at just over £22, 222 in balances, while higher-rate (40%) taxpayers would reach their allowance at just over £11, 111, because basic-rate taxpayers get a £1, 000 PSA and higher-rate taxpayers get a £500 PSA; top-rate (45%) taxpayers have no PSA. Interest is taxable as income, whereas Premium Bond prizes are tax-free.
The top easy-access cash ISA rate noted is 4. 4% — slightly lower than the top non-ISA rate but tax-free and offering a guaranteed return that, in recent comparisons, was higher than the Premium Bonds prize-fund when it stood at 3. 6%. If savers have large cash holdings, have used their £20, 000 a year ISA allowance and face interest income that exceeds the PSA, Premium Bonds could be an appropriate, tax-free option for those who accept the randomness of prize draws. For others seeking predictable returns, cash ISAs and interest-paying accounts remain more certain choices.
Holding limits and who is affected
People can hold up to £50, 000 in Premium Bonds, including accounts held for those aged under 16. NS&I cautions that most people with typical luck are unlikely to achieve the headline prize-fund return — even with the maximum £50, 000 held — so individuals should weigh the trade-off between a tax-free, lottery-style return and guaranteed interest when deciding where to place cash savings.
