Ns&i cuts Premium Bond prize-fund rate to 3.3% from April — what holders need to know

ns&i will cut its Premium Bond prize-fund rate to 3. 3% (from 3. 6%) for the April draw and beyond, and the odds of a win on any single bond will worsen from 1 in 22, 000 to 1 in 23, 000. The change alters the likely returns for savers who hold Premium Bonds and affects the prize mix in April’s monthly draw.

Ns&i lowers prize-fund rate and changes odds that have been stable since December 2024

The prize-fund rate will fall to 3. 3% for the April draw and onwards, down from 3. 6%. The odds of any single bond number winning — which the context says have been the same since December 2024 — will lengthen from 22, 000-1 to 23, 000-1. The cut is the latest step after a series of reductions last year that took the prize-fund rate from 4% in January to 3. 6% by August.

April draw to feature close to six million tax-free prizes worth about £375m and a reshuffled prize table

The April draw is expected to include close to six million tax-free prizes, with a total value of about £375m. The organisers have trimmed the number of higher-value prizes while increasing the number of £25 prizes. For April, the number of £100, 000 prizes is expected to fall from 78 this month to an estimated 71, while £25, 000 payouts are to be cut from 311 to 284. The number of £25 prizes is set to rise from about 2. 6 million to just over 2. 8 million.

How Premium Bonds compare with guaranteed interest on standard savings and cash ISAs

The prize-fund rate already lagged behind interest rates on standard savings. For many savers with average luck, accounts that pay interest are now even more likely to beat Premium Bonds because interest provides a guaranteed return. The context gives today’s top standard (non-ISA) easy-access rate as 4. 5%, which equates to £45 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 described in the context as offering a guaranteed return higher than the current Premium Bond prize rate of 3. 6% (which a saver would need luck to achieve).

Tax treatment, allowances and thresholds for savers

Premium Bond prizes are tax-free. By contrast, interest on normal savings is taxable as income, but savers benefit from a personal savings allowance (PSA). The context states the PSA so that 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, and top 45% rate taxpayers pay tax on all interest. Using the stated top standard easy-access rate of 4. 5%, the context calculates 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.

Who might still prefer Premium Bonds and expert cautions on returns

The context notes that most people with typical luck will not achieve a return equal to the headline prize rate — whether 3. 6% or the new 3. 3% — even with the maximum £50, 000 holding. Premium Bonds are described as a savings vehicle where, instead of interest, tax-free prizes are awarded in a monthly draw; prizes range from £25 to £1 million. The context warns that many savers mistakenly expect to receive the headline prize rate or a realistic chance at the £1 million jackpot, whereas the reality is that most are likely to get quite a lot less than the headline rate and have a negligible chance of winning a million.

Alastair Douglas, identified in the context as speaking for a consumer credit website, highlights the tax-free advantage for higher-rate taxpayers. The example given in the context says that if someone held the maximum £50, 000 and won the equivalent of 3. 3%, that equates to £1, 650 tax-free; a higher-rate taxpayer earning the same amount in interest could face a tax bill of £743. The context also notes a downside: Premium Bonds do not pay any interest and are more vulnerable to inflation than other savings, and it records advice that those seeking guaranteed returns should consider bank or building society accounts — some are described in the context as offering more than 4% with easy access.

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