NS&I cuts Premium Bonds prize fund rate and reduces chances of winning – are they still worth it?

Premium Bonds are set to provide lower average returns as National Savings and Investment (NS&I) will cut the prize fund rate and reduce the chances of winning in the monthly prize draw.

From the April Premium Bonds prize draw onwards, the prize fund rate, which represents the rate of return for a bondholder with average luck, will be slashed from 3.6% to 3.3%.

This will mean the total amount of money distributed among Premium Bonds winners in the April draw will fall to around £375 million, down from around £408 million in the February draw.

Try 6 free issues of MoneyWeek today

Get unparalleled financial insight, analysis and expert opinion you can profit from.

Start your trial

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

NS&I estimates that the lower prize fund rate will mean there will be fewer Premium Bonds prizes overall, falling from February’s total of 6,183,066 to an estimated total of 5,943,029 in April.

The number of prizes available is set to fall in almost every denomination. However, the number of £25 prizes up for grabs will increase from 2,643,007 to an estimated 2,806,003 in April, while the number of £1 million prizes will remain at two a month.

It will mark the sixth time the prize fund rate has been cut since September 2023, when it stood at a recent high of 4.65%. The most recent rate cut was in August 2025.

At the same time, the chances of winning a prize will be cut to 23,000 to 1 from April onwards. The current odds are 22,000 to 1, and have been the same since December 2024.

These changes together mean that the average Premium Bonds holder with normal luck will both win less often and see smaller average returns on their money.

Remember, Premium Bonds prizes are allocated entirely at random, meaning some luckier savers will get more than the prize fund rate implies, and some will achieve less.

Andrew Westhead, retail director at NS&I, said: “This change to the Premium Bonds prize fund rate and odds reflects changes in the wider savings market, and ensures we continue to balance the interests of savers, taxpayers and the wider financial services sector.

A table showing the Premium Bonds prizes distributed in the most recent prize draw compared to the estimated distribution in April’s draw can be found below.

Source: NS&I, 24 February

What is the Premium Bonds prize fund rate?

The Premium Bonds prize fund rate is an unusual measurement for the returns you may get on your savings.

Unlike a traditional interest rate which tells you how much guaranteed growth your savings will achieve in a year, the prize fund rate only tells you how much growth the savings of someone with average luck can expect from Premium Bonds prizes in a year.

As prizes are distributed entirely at random, savers will achieve higher and lower average returns than the prize fund rate.

NS&I uses the prize fund rate as a benchmark to determine how many prizes should be given away each month, and what size they should be. When it goes down, they will reduce the total amount of money paid out in a draw.

Are Premium Bonds still worth it?

With the chances of winning going down and the prize fund rate being slashed, the question of whether Premium Bonds are still worth it is raised.

Mark Hicks, director of active savings at Hargreaves Lansdown, said the prize fund rate cut “serves as a timely reminder as to whether you can get more for your money elsewhere.

“Premium Bonds don’t pay out interest – their prize rate is more of a benchmark of average return for your money. However, the reality is that, if you don’t win anything, you don’t get anything at all. It’s well worth looking at the wider savings market to see what deals are available.”

Most savers with average luck who have not used up their entire ISA allowance could get higher, and much more predictable, returns by putting their cash into one of the top cash ISAs on the market, paying up to 4.32%.

Money that grows within an ISA is also protected from tax, just like winnings from Premium Bonds, meaning you are not exposed to any extra tax liability.

If you have used up your full ISA allowance, then putting money in Premium Bonds may make more sense, but research shows that winnings are heavily skewed in favour of wealthier people as the more money you hold in the savings vehicle, the more likely you are to win.

A Freedom of Information request sent to NS&I by AJ Bell in April 2025 found that around 63% of Premium Bonds holders have never won a single penny from the monthly prize draws.

It also found that while the average holding for those who have never won a prize was just £106.79, the average holding for a winner was £23,397.

With the chances of winning reducing, and the total prize pot being slashed, Premium Bonds are set to become a much less competitive product in the savings market.

This being said, there are still some situations where putting your money in Premium Bonds could be worth it.

As mentioned above, if you have used up your entire ISA allowance and still have a lot of cash left over, putting it in Premium Bonds could be a good way to let it grow without having to pay any tax.

The caveat here is that this is probably only worth it if you have a truly significant amount of money sitting around.