- The Premium Bond prize rate will fall from 4.15% to 4% for the January draw.
- From Friday 20 December 2024, interest on the direct saver will fall from 3.75% to 3.50%, and on income bonds from 3.75% to 3.49% AER.
- The Premium Bond prize rate cut comes immediately after it dropped from 4.4% to 4.15% in December.
- The odds of winning in January will remain at 22,000 to one.
NS&I issued a press release today: New rates for Premium Bonds, Direct Saver and Income Bonds | NS&I Corporate Site
Sarah Coles, head of personal finance, Hargreaves Lansdown:
“You dread a Premium Bond prize rate cut for ages, and then two come along at once. Between November and January, the rate will have dropped from 4.4% to 4%. And most savers will get far less than this. It’s unlikely to put enthusiastic savers off the product, but it should make them think twice about the interest they’re missing out on elsewhere.
A cut was always on the cards, as savings rates across the easy access market fell. NS&I owes it to the taxpayer not to overpay for savings – so we were expecting a cut. Two cuts in two months will be a blow for savers though.
We know Premium Bond fans are unlikely to vote with their feet in huge numbers. The product is a national treasure, and an awful lot of people are wedded to them for life. They’ve faced pretty some dire prize rates in the past when rates were lower, so they’ve lived through worse than this. Our research shows that 61% of people are well aware that on average they’d be better off in a savings account, but savers are hanging on for the outside chance of a big win.
If you hold the bonds, you need to be absolutely certain you understand how they work, and that despite a prize rate of 4%, in an average month, the average bond holder with £1,000 in bonds will earn nothing. In the interim, the slight resurgence of inflation means your money will be losing more spending power. If you’re happy with this trade off, you may choose to stay put. However, if you want to switch, there are still plenty of decent rates on offer in the easy access savings market.
The prize rate fall comes alongside cuts to other NS&I easy access products, in an effort to ensure these don’t get too competitive either. There’s no danger of that. They’re decidedly lacklustre compared to the best on the market now. There are a raft of competitors offering 4.5% or more on easy access, so there’s no need for anyone to settle for 3.5% or less.
Some people will be hanging on because they have a large sum of savings they want to see in one place, without worrying about busting protection limits (elsewhere only the first £85,000 with each institution is protected). However, cash savings platforms offer a decent alternative. They let you spread the cash between different banks, and still see it all in one place – without sacrificing the rate.”
