NS&I has announced significant changes to the Premium Bonds prize draw, with the prize fund rate rising from 3.3 per cent to 3.8 per cent from the July draw. The odds of winning will also improve, moving from 23,000 to one to 22,000 to one. This follows a reduction earlier this year, when the rate was cut from 3.6 per cent to 3.3 per cent in April, and the odds worsened from 22,000 to one to 23,000 to one.
There have been three reductions to the prize fund rate in 2025. Jennifer Crichton, senior wealth planner at Killik & Co, warned that the rules can change as the savings landscape evolves. 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."
Ms Crichton advised savers not to assume prize fund rates will remain the same and recommended a "three-pot framework" for savings. The first pot is an emergency fund covering three to six months of essential outgoings, held in cash for immediate access. Premium Bonds can sit in this pot as they are Government-backed and accessible on request.
The second pot covers near-term goals, money needed within three to five years for foreseeable costs. For these, she suggested high-paying fixed-term savings accounts or cash ISAs for more predictable interest. The third pot is for long-term savings (over five years), where investing is likely the best option to grow wealth and beat inflation. Stocks and Shares ISAs offer tax-efficient growth and withdrawals, though all investing carries risks.
Ms Crichton emphasised keeping the three pots distinct to ensure long-term savings work harder, while Premium Bonds remain a liquid, low-risk part of an overall plan. NS&I can change terms at any time, and holders may go months or years without winning a prize.
