Premium Bonds cut to 3.3% from April shifts odds and prize mix — what changes for savers
From April, the change to premium bonds is simple and consequential: the annual prize‑fund rate falls to 3. 3% (from 3. 6%) and the odds of any single bond winning slide from 1 in 22, 000 to 1 in 23, 000. For Britain’s roughly 22 million bond holders that means a smaller theoretical average return and a prize pool rebalanced toward more low‑value payouts.
Premium Bonds: immediate effects on returns and the prize structure
Here’s the part that matters for savers: the published prize‑fund rate has dropped and NS&I has reshaped the April draw’s rewards. The annual benchmark that approximates an "average" return moves from 3. 6% to 3. 3%, while the odds lengthen to 1 in 23, 000 per bond number. The April draw is expected to include close to six million tax‑free prizes worth about £375m in total, but with fewer higher‑value prizes and more low‑value wins.
What the April draw will look like
The prize mix will shift: the number of £100, 000 prizes is set to fall from 78 this month to an estimated 71 in April; £25, 000 payouts will be reduced from 311 to 284; and the count of £25 prizes will increase from about 2. 6m to just over 2. 8m. Prizes range from £25 to £1m and are tax‑free. Odds per bond number have been unchanged since December 2024 and now move to the longer figure for April onward.
How prize risk compares with guaranteed savings
Premium Bonds do not pay interest, which makes them more vulnerable to inflation than accounts that do. By contrast, a top standard non‑ISA easy‑access rate of 4. 5% yields £45 a year on every £1, 000 saved, and a top easy‑access cash ISA rate of 4. 4% gives a guaranteed, tax‑free return. Because interest on normal savings is taxable, personal savings allowances matter: basic (20%) taxpayers have a £1, 000 tax‑free allowance on interest each tax year, higher (40%) taxpayers have £500, and top (45%) taxpayers pay tax on all interest.
Practical sums and who might still prefer Premium Bonds
- Most savers with average luck are unlikely to achieve the published prize‑fund rate in practice, even with the maximum £50, 000 held.
- If someone held £50, 000 and achieved the equivalent of 3. 3%, that would be £1, 650 tax‑free; a higher‑rate taxpayer earning the same in interest could face a tax bill of £743 on equivalent interest.
- Premium Bond prizes are tax‑free and could be attractive to those who have fully used a £20, 000 ISA allowance and who value tax‑free prize receipts over a guaranteed interest return.
- Those wanting a guaranteed return are advised to consider bank or building society accounts: some easy‑access offerings are above 4%.
Context and recent trendline
This reduction is the latest step in a series of cuts last year: the prize‑fund rate fell from 4% in January to 3. 6% by August, and now to 3. 3% for April’s draw and beyond. Odds per bond number were held steady from December 2024 until this upcoming change.
Key takeaways:
