A new premium bonds warning has been issued to millions of NS&I customers. The prize fund rate for Premium Bonds has dropped from 4 percent to 3.8 percent starting with the April 2025 draw. This change affects the total value of prizes and could impact your returns if you hold Premium Bonds.
Why Has the Prize Fund Rate Dropped?
NS&I has cut the prize fund rate in response to falling interest rates across the broader savings market. The Bank of England recently reduced its base rate, prompting NS&I to adjust its products in line with market conditions. This is the second rate cut this year, following a previous reduction from 4.15 percent to 4 percent in January.
How the Changes Affect Prize Winners
The odds of winning a Premium Bonds prize remain the same at 22,000 to one for each £1 bond you hold. However, the number of high-value prizes is shrinking. There will still be two £1 million jackpots each month, but the number of prizes worth £100,000, £50,000, £25,000, £10,000, and £5,000 will all decrease. More winners will now receive the smallest £25 prize, while the number of larger prizes drops.
| Prize Value | Number of Prizes (April 2025) | Change from February 2025 |
|---|---|---|
| £1,000,000 | 2 | No change |
| £100,000 | 78 | -4 |
| £50,000 | 157 | -7 |
| £25,000 | 313 | -15 |
| £10,000 | 781 | -39 |
| £5,000 | 1,565 | -76 |
| £1,000 | 16,445 | -757 |
| £500 | 49,335 | -2,271 |
| £100 | 1,830,825 | -161,472 |
| £50 | 1,830,825 | -161,472 |
| £25 | 2,170,903 | +362,988 |
The total prize fund will shrink from around £430 million to £411 million, but the number of prizes will increase slightly due to more £25 payouts.
What This Means for Your Savings
This premium bond warning highlights that most bondholders will win nothing in an average year. Even with the maximum £50,000 invested, the average return will likely be below the headline 3.8 per cent rate. Unlike a savings account, Premium Bonds do not guarantee a return. Your money is safe and tax-free, but inflation can erode its value if you do not win prizes.
Financial experts suggest reviewing your savings strategy. Top easy-access savings accounts currently offer up to 4.75 percent interest, which is higher than the new Premium Bonds rate. These accounts provide guaranteed returns, unlike the lottery-style payouts of Premium Bonds.
Could More Cuts Be Coming?
A premium bonds warning from financial analysts suggests further cuts are possible in the coming months. NS&I has seen a surge in new deposits, nearly reaching its annual fundraising target ahead of schedule. This influx of cash may prompt more reductions to keep the balance between savers, taxpayers, and market stability.
Sarah Coles, head of personal finance at Hargreaves Lansdown, warns that these cuts may not be the last. She notes that NS&I is “testing the loyalty of its premium bond holders” and advises savers to consider whether they are still happy with the deal.
Comparing Premium Bonds to Other Savings Options
Premium Bonds remain popular due to their government backing and the chance to win big prizes. However, their average returns now lag behind many standard savings accounts. You may find better value elsewhere if you want a guaranteed return. For those who enjoy the excitement of a possible jackpot and want 100 percent security, Premium Bonds still have appeal.
| Feature | Premium Bonds | Top Savings Account |
|---|---|---|
| Interest Rate/Prize | 3.8% average (not guaranteed) | Up to 4.75% (guaranteed) |
| Security | 100% government-backed | FSCS protected up to £85,000 |
| Tax Treatment | Prizes tax-free | Interest may be taxable |
| Chance of Big Win | Yes | No |
| Guaranteed Return | No | Yes |
What Should Bondholders Do Next?
You can check your Premium Bonds results using the NS&I prize checker app. Consider your financial goals and risk tolerance in light of this premium bonds warning. If you prefer certainty, compare the latest savings accounts and ISAs for higher guaranteed returns. If you value the thrill of a possible win and government security, you may choose to keep your bonds.
Financial advisers recommend reviewing your savings regularly, especially after changes like the latest prize fund rate cut. Stay informed about further updates from NS&I, and watch for any new premium bond warnings in the months ahead.