NS&I Premium Bonds customers handed 'horrible news' and 25-day warning

National Savings and Investments customers who hold Premium Bonds have been issued a 25-day warning ahead of a brutal rate cut. NS&I Premium Bonds customers have just over three weeks before the odds of winning are dramatically reduced.

National Savings & Investments (NS&I) is cutting the Premium Bond prize fund rate from 4.4% to 4.15%. The change to Premium Bonds will come into effect in the December draw. It marks the second cut by the government-backed savings giant this year.

In March, the prize rate was reduced from 4.65% - its highest rate since 1999 - to 4.4%. Sarah Coles, head of personal finance at Hargreaves Lansdown, commented: “Like any horrible news, it doesn’t make it any easier that we knew this was coming.

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"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.” From the December draw, the prize fund rate for Premium Bonds will fall from 4.4% to 4.15%.

The odds of winning will reduce from the current odds of 21,000 to 1 to 22,000 to 1. Andrew Westhead, NS&I retail director, comments: “As the savings market continues to change, we need to lower the rates on some of our products to help us meet our tet financing target, while also ensuring we continue to balance the interests of our savers, taxpayers and the broader financial services sector.”

According to Coles, it’s the first drop in interest rate for these products in four years, “but at 3.75% AER, they’re still well off the pace of the best on the market, where you can still make up to 5% - and a vast array of accounts still offer well over 4.5%”. Ms Coles said: “If you’re holding any of these accounts – or indeed any account where the bank has cut the rate - don’t assume it’s not worth switching because deals are falling everywhere. There are still some great rates available from online banks and cash savings platforms, so now is the time to move and make the most of them.”