Premium Bonds Holders Urged to Act Before 'Fast-Approaching' Deadline
Premium Bonds holders have received a critical update from NS&I, with major changes to the scheme set to take effect soon. Savers are being advised to consider making account adjustments to potentially secure better returns, as the deadline for action is rapidly approaching.
Key Changes to Premium Bonds Scheme
Starting from the April draw, NS&I will implement significant reductions in the Premium Bonds structure. The prize fund rate will be lowered from its current 3.6 per cent to 3.3 per cent. Additionally, the odds of winning for each £1 Bond will worsen, decreasing from 22,000 to one to 23,000 to one.
It is important to note that even successful prizes are typically for modest sums, such as £25 or £50. However, many holders experience prolonged periods without any prize—potentially lasting months or even years.
Financial experts at AJ Bell have analysed NS&I data, revealing that over six in ten customers have never claimed a prize. This equates to more than 14.2 million Bond holders who have seen absolutely no returns on their investment.
Strategies to Improve Your Chances
To enhance your probability of success, purchasing additional Bonds is the most effective strategy. The maximum holding permitted is £50,000 in Bonds. A study showed that merely six percent of prizes distributed between February 2025 and January 2026 were awarded to individuals holding £10,000 or less in Premium Bonds.
With the diminishing chances of securing a prize, many savers may be considering withdrawing their funds from Premium Bonds. Laura Suter, director of personal finance at AJ Bell, commented: "The rates on Premium Bonds are now significantly below the top savings rates in the market, meaning savers may be sacrificing returns for the safety and brand name of NS&I."
Exploring Alternatives to Premium Bonds
Ms Suter outlined several viable options for those looking to move their savings away from Premium Bonds. She explained: "Using a Cash ISA will protect people's savings from tax—as one of the perks of Premium Bonds is that the prize is tax-free."
You can pay up to £20,000 per tax year into an ISA, and the deadline for this year is fast approaching. Alternatively, if you have maxed out your ISA already this year, you can opt for a non-ISA easy-access account.
It is crucial to note that the ISA allowance will be changing shortly. Currently, you can save up to £20,000 each tax year, split as you wish between cash ISAs or stocks and shares ISAs. However, from April 2027, £8,000 of this allowance will be restricted to investment-based accounts only, meaning you will be able to put away just £12,000 as you choose.
Additional Savings Options
Ms Suter discussed another potential home for your savings. She explained: "Another option if you know you do not need access to the money immediately is to use a fixed rate account, which may pay more interest. But you cannot usually access this money before the end of the term, so you have to be certain you will not need it."
Alternatively, if you will not need the money for five or more years, you could consider investing it for a potentially higher return. By taking a bit more risk with the money, you could boost your returns—as over the long term, investing has generally outperformed cash. If you do this in an ISA, your gains will be protected from tax too.
Future Outlook for Premium Bonds
Another consideration is whether we might see additional rate reductions for Premium Bonds in the coming months. NS&I axed the prize rate three times in 2025, as the base interest rate set by the Bank of England has also declined over the past year.
Ms Suter commented: "Premium Bonds are hugely popular accounts, and it is no surprise that NS&I recently cut the prize draw, as more people flock to the accounts. The upcoming changes to Cash ISAs mean more people may move to Premium Bonds as an ISA alternative."
She added: "Our own research found that a quarter of people would opt for Premium Bonds if the cash ISA limit was cut. All of this means that NS&I does not need to offer such high returns to attract customer money—which may lead to more prize fund cuts in future."
However, NS&I also bases the Premium Bond expected prize fund rate on future interest rate expectations and what other savings providers are doing. The path for the Bank of England's rate changes now does not look as clear, so it is harder to predict which way savings rates will swing.
