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27th March 2017
Premium Bond Prizes Cut

Premium Bond

Savers will have a slimmer chance of winning some of the biggest Premium Bond prizes from May, according to National Savings and Investments (NS&I).

The amount of big money rewards are set to fall, with the estimated number of tax-free £100,000 prizes each month going from three to two. It has also been announced that there will be two fewer £25,000 prizes.

The reductions have come as part of a wider cut in interest rates across a range of NS&I’s savings products. Cuts of up to 0.25% “reflect market conditions”, the government organisation said.

These decreases follow last June’s interest rate cuts on the same variable rate products – the Direct ISA, the Direct Saver and Income Bonds.

These premium bonds are issued by the NS&I and are guaranteed by the treasury. With the UK boasting 21 million premium bond holders, they are a particularly popular product.

In May, the total number of prizes will fall from the current figure of around 2,224,513 down to an estimated 2,219,493. Although there will be fewer high value awards, the amount of £25 prizes will increase.

NS&I have revealed that the interest rate for both Income Bonds and the Direct ISA will fall in May, from the current rate of 1% to 0.75%.

The Direct Saver account will see its interest rate drop from 0.8% to 0.7% at the same time.

NS&I blamed the cut on the decision by the Bank of England to decrease the base rate from 0.5% to 0.25% in August, along with the market reaction to that.

Steve Owen, acting chief executive of NS&I, said: “We have taken the time to absorb the impact of the Bank of England base rate reduction and subsequent changes across the savings market. The new rates reflect current market conditions and allow us to continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector.

“We appreciate that savers will be disappointed, but we believe that the new rates present a fair offer to customers.”

Chancellor Philip Hammond said, in November last year, that a new savings bond offering a “market-leading” rate of around 2.2% would go on sale through NS&I in the spring.

For the moment the rate of 2.2% is only “indicative”, and will be fixed when the bond is launched some time after April 2017.