NS&I has announced major changes to Premium Bonds
NS&I is making some changes to Premium Bonds(Image: Getty)
Premium Bonds holders dismayed by NS&I’s upcoming prize fund rate cut have been pointed to another impending change to savings rules. The monthly prize draw offers the tantalising prospect of winning substantial sums – including £50,000, £100,000, or one of the coveted £1million jackpots. However, the harsh reality is many savers endure lengthy periods without claiming any prizes whatsoever.
NS&I has confirmed it will be slashing both the prize rate and the odds of winning for the scheme. From April 2026’s draw onwards, the prize rate will drop from 3.6 per cent to 3.3 per cent, while the odds of winning for each £1 Bond will worsen from 22,000 to one to 23,000 to one. These diminishing prospects of bagging a big prize may prompt some savers to explore alternative savings products.
Michele Tieghi, financial expert and founder of psyfi money, discussed who might still find Premium Bonds suitable as a savings option. He explained: “Premium Bonds offer a safe investment, as you can’t lose money.
“It’s also great for those who might need quick access to their cash, as you can take your money out of Premium Bonds at any time. However, the downside to Premium Bonds is that there is no guaranteed income.”
Those thinking of cashing in their Bonds should be mindful of another forthcoming savings change. As revealed in the Autumn Budget 2025, the ISA allowance will be reduced from April 2027.
Savers can presently deposit up to £20,000 annually, distributed as they choose between cash ISAs and stocks and shares ISAs. However, under the forthcoming changes, savers will only be permitted to deposit up to £12,000 as they choose, while the remaining £8,000 must be allocated to investment-based accounts.
Those aged over 65 will be exempt from these new rules and will retain the current allowance. For someone depositing £20,000 into Premium Bonds, their average annual prize winnings would range between £600 and £900, according to Mr Tieghi.
Meanwhile, easy access cash ISAs are offering rates of up to 4.4 percent. Investing the present £20,000 ISA allowance at this rate would generate £880 annually in interest, although interest rates are expected to decline further throughout the year.
Risk-free alternatives
Mr Tieghi spoke about how the changes to the ISA allowance might influence saving patterns. He explained: “The new cash ISA limit in 2027 could cause more people to put their money into Premium Bonds.
“If they previously invested £20,000, and they’re quite a safe investor, then they will be keen to look at risk-free alternatives. Premium Bonds will offer exactly that, even if the return on investment will likely be less.
“It could be a case of £12,000 being put in a cash ISA, and £8,000 being put into Premium Bonds. But the efficiency of investing in Premium Bonds could further reduce this year, especially if the Bank of England cuts interest rates further.”
He warned that if there are further reductions to the prize rate this year, the rate could fall as low as the 2.5 percent to 3 percent range.
Ensure our latest headlines always appear at the top of your Google Search by making us a Preferred Source. Click here to activate or add us as your Preferred Source in your Google search settings.