Are Premium Bonds still worth it? NS&I announces latest prize fund cut

This marks the third cut this year, though the odds of winning hold steady.

National Savings and Investments (NS&I) announced yesterday that the prize fund for their popular Premium Bonds products will be reducing yet again from the August 2025 draw, this time to 3.60%. This now means that for every £100 of Premium Bonds purchased, only £3.60 will be paid out in prizes on average.

This announcement follows previous reductions seen earlier in the year, where the prize fund fell to 4.00% in January, before dipping further to the current 3.80% rate in April. It also marks the lowest the prize fund rate has been since the March 2023 draw, where it lowered to 3.30%.

Alongside this latest cut, fewer winnings will be up for grabs, except the number of £25 prizes (the smallest but most common payout), which is estimated to increase from 2,197,831 in June to 2,569,568 in August. Meanwhile, there will still be two of the provider’s flagship £1,000,000 jackpots.

What’s behind this latest cut?

According to Andrew Westhead, NS&I Retail Director, this latest cut “reflects the changing landscape for savings,” and was necessary to “continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector.”

Indeed, this change is likely in response to the Bank of England’s Monetary Policy Committee (MPC) decision to slash the UK’s central interest rate to 4.25% last month. This tends to cause a ripple effect across the savings market, influencing variable rates first, which includes the prize fund for Premium Bonds.

Nevertheless, NS&I made it clear that the odds of winning the approximately six million tax-free prizes expected in August will remain at 22,000 to 1 for every £1 held with a Premium Bond.

Are Premium Bonds still worth it?

Premium Bonds have long been a popular choice for savers, though a steadily declining prize fund rate coupled with the scarcity of winning may leave many questioning whether they should move their money elsewhere.

A Freedom of Information request (FOI) obtained by investment platform AJ Bell back in April 2025, for instance, revealed that out of the then 22.7 million Premium Bond holders, a considerable 14.4 million (63%) had yet to win any prizes.

“When you factor in that many people will have been holding Premium Bonds for decades, perhaps receiving them as gifts when they were young, that means they may have missed out on significant returns in a higher paying cash account or by investing,” explained Laura Suter, Director of Personal Finance at AJ Bell.

With inflation rocketing to 3.5% during the same month (April) and expected to rise higher by the end of the year, money held in Premium Bonds could be worth less in real terms compared to high-paying savings accounts. As it currently stands, savers can find top easy access returns peaking at 5.00% AER, while the best-performing fixed accounts pay returns upwards of 4.40% AER.

However, Rachel Springall, Finance Expert at Moneyfactscompare.co.uk, believes many won’t be deterred by these incoming changes.

“Premium bonds do not pay interest, but these can appeal to savers who want to test their luck for winning big in the prize draw,” she explained, adding that “they continue to be a great gift idea, such as for children, as a bond can be bought with just £25.”

As NS&I is backed by the Treasury, it can also offer greater security than even the Financial Services Compensation Scheme (FSCS) and can guarantee 100% of your savings, even if no prizes are won.

“If savers look further back, the odds of winning and the prize fund rate is better than say five years ago, so it’s not all bad news,” Springall continued.