Premium Bonds prize rates fall, impacting millions of savers

In the United Kingdom, National Savings and Investments (NS&I) has announced a reduction in the prize rate for Premium Bonds, which will be effective beginning August 2025. This move is part of the organization's strategy to adjust to a shifting savings landscape and follows previous cuts made earlier in the year. The prize fund is set to drop from 3.8 percent to 3.6 percent, marking the third decrease for 2025. Despite the unchanged odds of winning, the lower prize rate will reduce the number of prizes, significantly for higher amounts. For example, the number of £50,000 prizes will decrease from 159 to 151, while the £25,000 prizes will fall from 317 to 302. However, the number of £1 million prizes will remain constant at two, and the quantity of £25 prizes is projected to increase to approximately 2.56 million, up from 2.19 million. The changes raise questions about the viability and appeal of Premium Bonds for savers, especially in the context of other savings accounts that offer guaranteed interest returns. Martin Lewis’s Money Saving Expert site has indicated that for average savers, interest-paying accounts may be more appealing and beneficial compared to Premium Bonds. Research conducted by Octopus Money further emphasizes the challenges faced by Premium Bond holders, revealing that on average, they wait around 3.5 years to win a prize. This cut in prize rate reflects economic trends and poses significant implications for savers who rely on these bonds for returns.