Premium bond holders face worse odds from April as National Savings and Investments (NS&I) reduces the prize fund rate from 3.6% to 3.3% per year. The change means the odds of winning with each £1 bond will lengthen from 22,000-1 to 23,000-1.
NS&I announced that the April draw will feature nearly six million tax-free prizes worth approximately £375m. However, the number of higher-value prizes will be trimmed, with £100,000 prizes falling from 78 to an estimated 71, and £25,000 payouts cut from 311 to 284. The number of £25 prizes will rise from about 2.6m to just over 2.8m.
Alastair Douglas of TotallyMoney noted that premium bonds remain tax-free, benefiting higher-rate taxpayers. For example, holding the maximum £50,000 and winning the equivalent of 3.3% yields £1,650 tax-free, compared to a potential £743 tax bill on similar savings interest.
However, premium bonds pay no interest, making them more vulnerable to inflation. Douglas advised those seeking guaranteed returns to consider savings accounts offering over 4% with easy access, as per Moneyfacts best-buy tables.
