NS&I to cut Premium Bonds prize fund rate to 4.4% - what does this mean for the March draw?
National Savings & Investments is to slash the Premium Bonds prize fund rate from March 2024 to 4.4% and further cuts could follow. We have all the details
National Savings & Investments (NS&I) has announced it will cut the Premium Bond prize fund rate in March 2024 from 4.65% - its highest rate since 1999 - to 4.4%.
It comes after the NS&I Premium Bonds prize rate was increased from 4% to 4.65% in September 2023.
The government-backed savings provider has kept the odds of winning the same on its Premium Bonds, at 21,000 to 1 for every £1 Bond.
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Even though the prize fund rate is being dropped, this compares to a 3.3% prize fund rate back in March 2023, when the odds of winning were 24,000 to 1.
There could be more rate cuts on the way though.
How many prizes will be given out in the March 2024 prize draw?
NS&I uses its prize fund rate as a benchmark to set how many prizes of each value should be given away each month.
Since the rate will be cut from March 2024 to 4.4%, the number of Premium Bond prizes available will also drop.
Andrew Westhead, NS&I Retail Director, said: “After these changes, the Premium Bonds draw in March is expected to pay out over 5.7 million tax-free prizes totalling more than £444 million to savers across the UK.”
This compares with 5,843,447 prizes worth a total £475,510,350 in the January 2024 draw. It means 72,000 fewer prizes and £31million less in total winnings.
Here’s how NS&I predicts March’s prize draw will be distributed, and how it compares to January 2024’s draw.
Swipe to scroll horizontally
Value of prizes
Number and total value of prizes in January 2024
Number and total value of prizes in March 2024 (estimate)
Difference in number of prizes from January to March 2024
£1,000,000
2
2
0
£100,000
91
85
-6
£50,000
182
170
-12
£25,000
365
339
-26
£10,000
912
848
-64
£5,000
1,821
1,697
-124
£1,000
19,020
17,775
-1,245
£500
57,060
53,325
-3,735
£100
2,363,105
2,130,923
-232,182
£50
2,363,105
2,130,923
-232,182
£25
1,037,784
1,435,338
+397,554
Total
5,843,447 prizes worth a total of £475,510,350
5,771,425 prizes worth a total of £444,399,400
-72,022 prizes
The biggest fall is in £100 and £50 prizes. But we could see nearly 400,000 more prizes worth £25.
Experts believe that NS&I’s Premium Bond prize fund rate will follow, and continue to drop its rate.
But this is more down to the fact that NS&I can now ‘take it easy,’ as it reached its £7.5 billion fundraising target for 2023/24 in just six months.
Although Premium Bonds is NS&I’s most popular offering in general, the government-backed provider had major success on its 6.2% one-year guaranteed bond which came onto the savings market last summer- but was pulled after five weeks of being on the market due to high demand.
Myron Jobson, senior personal finance analyst at interactive investor, says: ““Put simply, the NS&I no longer needs to attract new cash, and the savings bank can now afford to row back on its generous offerings. Savers might need to brace themselves for less generous offerings from the NS&I going forward.”
Sarah Coles, head of personal finance at Hargreaves Lansdown also warns more cuts are on the way.
“The coffers are full to bursting at NS&I,” she says.
“It doesn’t need to attract more cash, so it’s applying the brakes, and Premium Bond holders are paying the price. If this doesn’t halt the flow of cash, there may well be more cuts on the cards.”
As a result, it might be time for Premium Bond holders to explore the rest of the savings market, which currently offers up to 5.22% on an easy-access savings account and up to 5.5% on a one-year fixed deal.
Coles advises savers: “If you are considering putting money into Premium Bonds, it’s not just the cut in the interest rate that needs to be part of the decision. You also need to consider the fact that in the average month, the average bond will win nothing, so Premium Bonds will be losing money after inflation.
“Now that so many easy access accounts are keeping pace with inflation, it’s important to be aware you’re paying the price for an outside chance of winning a life-changing sum of money.
“For many people, the certainty of a savings rate will still hold appeal, in which case it’s worth shopping around among the smaller banks, building societies and savings platforms for the best possible rate.”
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Vaishali has a background in personal finance and a passion for helping people manage their finances. As a former staff writer for MoneyWeek, Vaishali covered the latest news, trends and insights on property, savings and ISAs.
She also has bylines for the U.S. personal finance site Kiplinger.com and Ideal Home, GoodTo, inews, The Week and the Leicester Mercury.
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