21 million savers to lose out from Premium Bond cuts

National Savings and Investments (NS&I), the organisation behind Premium Bonds, has said that savers will have a slimmer chance of winning some of the biggest Premium Bond prizes from May.

As part of a wider cut in interest rates across a range of NS&I’s savings products the estimated number of tax-free £100,000 prizes each month will fall from three to two, and there will also be two fewer £25,000 prizes.

The total number of tax-free prizes will also fall in May to an estimated 2,219,493 from about 2,224,513 and there will be a higher number of £25 prizes.

This means the total prize fund for the 21 million people who have premium bonds will fall from £69.5 million to £63.8 million, although the two jackpot prizes of £1 million each month will remain.

The NS&I cuts of up to 0.25 percentage points on premium bonds follows similar cuts on the organisation’s Direct Isa, Direct Saver and Income Bonds last summer.

NS&I also announced that the interest rate for the Direct Isa and for Income Bonds will fall again from the current rate of one per cent to 0.75 per cent in May, while The Direct Saver account will see its interest rate drop from 0.8 per cent to 0.7 per cent.

The Bank of England’s cutting of the base rate from 0.5 per cent to 0.25 per cent in August 2016 and the reaction to the move across the savings market is the reason for lower rates, according to NS&I.

“We have taken the time to absorb the impact of the Bank of England base rate reduction and subsequent changes across the savings market,” said Steve Owen, acting Chief Executive of NS&I.

“The new rates reflect current market conditions and allow us to continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector.

“We appreciate that savers will be disappointed, but we believe that the new rates present a fair offer to customers.”

Link: NS&I Premium Bonds