Premium Bonds savers told to ‘expect fluctuations’ as prize changes come in | Personal Finance | Finance
NS&I has announced key changes to the Premium Bonds scheme (Image: Getty)
Premium Bonds savers have been warned there could be uncertain times ahead for the savings scheme. This comes as provider NS&I recently announced some key changes to the monthly prize draw.
NS&I recently told customers that it would increase the prize fund rate from the July draw, up from the current 3.3 percent to 3.8 per cent. The odds of winning for each £1 Bond will also go up, increasing from 23,000 to one to 22,000 to one.
This happy change of fate comes not long after NS&I recently axed the rate, down from 3.6 per cent to 3.3 per cent, from the April draw. The odds of winning were also cut then, from 22,000 to one to 23,000 to one.
‘Expect fluctuations’
There were three cuts to the prize fund rate in 2025. Jennifer Crichton, senior wealth planner at wealth management group Killik & Co, said that the rules can change as the wider savings market is shifting.
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She said: “The prize fund rate for Premium Bonds is variable and broadly tracks the Bank of England rate, so as interest rates have come down, the effective rate on offer has followed, and savers should expect fluctuations. Savers who rely heavily on Premium Bonds as a primary savings vehicle shouldn’t assume prize fund rates will remain the same, and building a broader savings plan is a sensible approach.”
The expert encouraged savers rethinking their plans to take a “three-pot framework” approach to their savings. This refers to three categories of savings that you should think about.
Ms Crichton said: “The first pot is an emergency fund. This typically covers three to six months of essential outgoings, sometimes more, and is held in cash for more immediate access.
“Premium Bonds can sit in this pot, as they’re Government-backed and can be accessed upon request. The second pot covers near-term goals, money that likely needs accessing within the next three to five years for foreseeable costs, e.g. larger payments or planned purchases.”
‘More predictable’
She said for these medium-term objectives, you should look at the top-paying fixed-term savings accounts, or cash ISAs, so you can get “more predictable interest” than with your Premium Bonds.
Not only can NS&I change the rules and your chances of a win can change, but you can go months or years without winning a prize. The expert explained the final pot to consider.
She said: “The third savings pot is for the long term, so money that you do not expect to need for at least 5 years. Investing is likely to be the best option to grow this pot and protect from the effects of inflation.
“Stocks and Shares ISAs are a very tax-efficient option for this third pot, benefitting from tax-free growth and withdrawals. However, all investing comes with risks. Keeping those three pots distinct is important to ensure long-term savings can work harder for longer, while Premium Bonds remain a liquid, low-risk aspect of an overall savings plan.”
