Britain's 22 million premium bond holders face a reduction in their chances of winning a prize from April, as National Savings and Investments (NS&I) cuts the prize fund rate from 3.6% to 3.3% per year. This change means the odds of winning with each £1 bond will lengthen from 22,000-1 to 23,000-1.
The April draw is expected to include nearly six million tax-free prizes worth approximately £375m, but NS&I has reduced the number of higher-value prizes while increasing the number of £25 prizes. For instance, the number of £100,000 prizes will drop from 78 in March to an estimated 71 in April, and £25,000 payouts will fall from 311 to 284. Conversely, the number of £25 prizes will rise from about 2.6 million to just over 2.8 million.
Alastair Douglas of TotallyMoney noted that premium bonds remain tax-free, which benefits higher-rate taxpayers. He explained that someone holding the maximum £50,000 and winning the equivalent of 3.3% would receive £1,650 tax-free, whereas a higher-rate taxpayer earning the same in savings could face a tax bill of £743.
However, premium bonds do not pay interest and are therefore more vulnerable to inflation than other savings. Douglas advised those seeking a guaranteed return to consider bank or building society savings accounts, some of which offer over 4% with easy access. For the latest information, he recommended checking the Moneyfacts savings best-buy tables.
