Premium Bonds: NS&I odds will get worse this year as provider cuts prizes and UK savings rates

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The changes mean you’re less likely to win on Premium Bonds 💰
  • Starting December 2024, the odds of winning Premium Bonds will worsen
  • The total number of prizes will available will also decrease
  • NS&I is also reduce interest rates for Direct Saver and Income Bonds to 3.75% AER from 4.00%
  • The changes are a response to evolving conditions in the savings market and recent Bank of England rate cuts
  • The combination of lower winning odds and reduced interest rates may lead consumers to reconsider their savings strategies

The odds of winning Premium Bonds will worsen starting with the December 2024 draw.

NS&I will also reduce some savings rates from 20 November, citing changes in the savings market as the reason.

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The government-backed provider announced that the odds for winning Premium Bonds will shift from 1 in 21,000 to 1 in 22,000.

For the December draw, there will still be an estimated two ÂŁ1 million prizes, but the total number of prizes will decrease to approximately 5,726,438, with a combined value of ÂŁ435,686,300.

For comparison, this month’s draw included 5,991,306 prizes totalling £461,330,525 this month. The prize fund rate for Premium Bonds will also be adjusted to 4.15% in December, a decrease from the current 4.40%.

(Photos: Getty Images/Pexels)(Photos: Getty Images/Pexels)
(Photos: Getty Images/Pexels) | Getty Images/Pexels

Why are Premium Bonds’ winning odds getting worse?

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The Premium Bond prize rate has finally been hit with the business end of the savings rate scythe, as NS&I has followed the rest of the easy access savings market by cutting the chances of a win.”

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NS&I, which is backed by the Treasury, has a duty to balance the needs of savers, taxpayers and the wider financial market. It can't offer excessively high rates or prizes, which could lead to losses for the taxpayer.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “This was always going to happen eventually. NS&I has a duty not to overpay for the money it raises for the Treasury, which means the prize rate needs to be middle of the pack within the easy access savings market.

“Of course, the prize rate doesn’t reflect what you’ll make in these bonds, and because of the lumpy way that prizes are awarded, the average person with £1,000 in bonds will still win nothing in the average month.

“The lengthening of the odds of a win should be food for thought for anyone who is holding money in these accounts and losing money after inflation.”

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What else is changing?

For the first time since November 2020, NS&I will also reduce interest rates for Direct Saver and Income Bonds.

From Wednesday 20 November, the variable interest rate for Direct Saver and Income Bonds will change to 3.75% AER (annual equivalent rate), from 4.00% currently.

This means those with Direct Saver and Income Bonds will earn less on their savings, which could impact their overall financial plans and savings goals.

The Bank of England base rate was recently cut and further reductions are expected to follow. As a result, NS&I has had to lower its own rates to keep in line with the overall market.

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The combination of worsening prize odds and lower interest rates may make Premium Bonds seem less attractive.

People may question whether they should keep their money in Premium Bonds or move it to other savings options that offer better rates.

A new two-year issue of British Savings Bonds has also gone on sale offering 4.10% AER for the Guaranteed Growth Bond option and 4.09% AER for the Guaranteed Income option, both down from previously offered rates of 4.25%.

Referring to the rate reductions on the new launch of British Savings Bonds, Coles added: “You can do far better elsewhere, with the best on the market offering 4.6%.

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“And while the Treasury guarantee of your savings and the attraction of the brand will go a long way, for plenty of people it’s not going to make up enough ground. These bonds look unlikely to shake or stir anyone.”

We want to hear from you! How do these changes in Premium Bonds and savings rates affect your financial plans? Are you considering alternative savings options? Share your thoughts and experiences in the comments section.

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