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Rhiannon Philps

Content Writer
Published: 16/01/2024
Putting savings into a jar

Premium Bonds prize fund rate drops to 4.40% but the odds of winning remain the same.

National Savings and Investments (NS&I) recently announced it will be cutting the prize fund rate on Premium Bonds from 4.65% to 4.40%. The reduced rate will come into effect from the March 2024 draw and follows several successive increases since 2022.

Even though the rate is dropping, it will still be higher than last year when the rate was 3.30%.

You can deposit between £25 and £50,000 in Premium Bonds, but instead of receiving interest on your money, you’re entered into a monthly prize draw. Despite the change in rate, the chances of winning a prize stay the same as before, at 21,000 to one.

As average rates on savings accounts have started to fall in recent weeks, and with some experts predicting that the Bank of England will cut the base rate sooner than expected, it’s perhaps not surprising that NS&I is following this trend.

 

What is the Premium Bond prize fund rate?

The prize fund rate is an estimate of the average amount you could earn on any money you deposit in Premium Bonds. However, because Premium Bonds offer prizes instead of a guaranteed rate of interest, you could get a better or worse return than the advertised rate.

Fewer prizes to win

The total number of prizes available in the Premium Bonds draw is estimated to fall from 5,843,447 in January 2024 to 5,771,425 from March 2024. This means there could be roughly 72,000 fewer winners each month from March.

And the total value of all prizes is estimated to fall from over £475 million to £444 million.

While there will still be two £1 million prizes on offer each month, the number of prizes across most other categories will fall.

The only exception is the £25 prize, which is predicted to have 1,435,338 winners, up from 1,037,784 in January 2024.

“These changes reflect our requirement to strike a balance between the interests of our savers, taxpayers and the stability of the broader financial services sector,” commented Andrew Westhead, NS&I Retail Director.

 

Are Premium Bonds worth it?

With the drop in the prize fund rate, you may be questioning whether it would be better to put your money into Premium Bonds or a savings account.

As with any decision about your finances, the answer depends on your individual situation and saving goals.

Because Premium Bonds offer prizes instead of paying interest, the return you could make on your money isn’t guaranteed. This means any money you win from Premium Bonds could end up being higher than the advertised prize fund rate or, more likely, lower.

For a more guaranteed return on your money, you could consider a savings account or an Individual Savings Account (ISA). Even though rates on savings accounts seem to be on a downward trajectory, there are currently several providers that are offering a higher rate of interest than the Premium Bond prize fund rate.

Disclaimer

Information is correct as of the date of publication (shown at the top of this article). Any products featured may be withdrawn by their provider or changed at any time. Links to third parties on this page are paid for by the third party. You can find out more about the individual products by visiting their site. Moneyfactscompare.co.uk will receive a small payment if you use their services after you click through to their site. All information is subject to change without notice. Please check all terms before making any decisions. This information is intended solely to provide guidance and is not financial advice. Moneyfacts will not be liable for any loss arising from your use or reliance on this information. If you are in any doubt, Moneyfacts recommends you obtain independent financial advice.

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