NS&I Premium Bonds: UK prize fund rate will be slashed in January 2025 - what it means for cash prizes

• NS&I will lower the Premium Bonds prize rate from 4.4% to 4.15% in December 2024, and further to 4% in January 2025
• The odds of winning will remain at 22,000 to 1, but fewer high-value prizes will be available
• The number of £25 prizes will increase significantly to 1.8 million in January, up from 1.5 million in December
• NS&I says the changes reflect market conditions and its responsibility to savers, taxpayers and the wider economy

NS&I has announced that the prize fund rate for Premium Bonds will become less generous next year.

The rate currently sits at 4.4%. In October, NS&I revealed that the prize fund rate would fall to 4.15% in December. The rate will then fall again to 4% from the January 2025 draw.

The prize fund rate is the percentage of the total value of all Premium Bonds that is used to pay out prizes.

The reduction means that the total amount of money available for prizes will be lower, which directly impacts the number and value of prizes that can be awarded.

The odds of winning in January will remain unchanged from December, standing at 22,000 to one.

But there will be a slightly lower amount of high-value prizes up for grabs, with an estimated 82 prizes of £100,000 available in the January draw - down from 83 in December.

There will be an estimated 166 prizes of £50,000 in January, down from 167 in December, while the estimated number of £1 million prizes will remain the same, at two.

There will be a higher number of lower-value prizes of £25 in January, estimated at 1,815,854, up from 1,509,458 in December.

NS&I, which is backed by the Treasury, has a duty to balance the needs of savers, taxpayers and the wider financial market. The Bank of England base rate has been cut twice this year.

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Andrew Westhead, NS&I retail director, said: “We carefully review our savings rates in response to changes in the broader market.

“These adjustments help us meet our net financing target while balancing the interests of our savers, taxpayers and the wider financial services sector.

“Premium Bonds remain a popular choice for millions of savers, backed by the 100% Government guarantee, with the January 2025 draw set to deliver over 5.8 million tax-free prizes worth more than £431 million.”

NS&I added that from December 20 the interest rate for its Direct Saver will reduce to 3.5% AER (annual equivalent rate) and Income Bonds to 3.49% AER. Both are reducing from 3.75%.

Laura Suter, director of personal finance at AJ Bell, said: “The rates are now significantly below the top rates in the market, meaning savers are paying a decent premium for the safety and brand name of NS&I.

“Anyone with money in easy access NS&I accounts should weigh up whether they would be better switching to a rival to clinch some extra interest.”

What do you think about NS&I’s changes to Premium Bonds and savings rates? Will you stick with them for the government-backed security, or are you considering switching to rivals for better returns? Share your thoughts in the comments.