NS&I cuts interest rates and reduces Premium Bond prizes so savers have less chance of winning
MILLIONS of Premium Bond holders will have their chances of winning a prize fall from May 1, while savers will also see interest rates slashed.
NS&I, which operates both the Premium Bond prize draw and a host of traditional savings accounts, has today revealed it's cutting interest rates and prizes across the board.
For 20.9million Premium Bond holders, this means less chance of winning a prize.
Currently between £25 and £1million is up for grabs each month.
The exact number of prizes varies depending on how many Bond holders there are at the time of the draw, but it's based on holders having a one in 24,500 chance.
But from May 1, this will drop to a one in 26,000 chance of winning - which will also see the effective interest rate Premium Bonds pay fall from 1.4 per cent to 1.3 per cent.
While it's too early to say how many people will still hold Premium Bonds come May, based on current levels this will see the number of £100,000 prizes fall from six to five.
While at the other end of the scale the number of £25 prizes is estimated to fall from roughly 3.4million to 3.2million.
But it's the £100 and £50 prizes that will see the largest axe, with the number of both of these expected to fall from 27,221 to 13,448.
The number of £1million prizes is, however, expected to remain at two.
Savings rates slashed
But it's not just Premium Bond holders affected as savings rates are also falling from the same date.
The 150,000 people with NS&I's Direct Saver will see rates fall from 1 per cent to 0.7 per cent.
While the 181,000 with Income Bonds will see rates drop from 1.16 per cent to 0.7 per cent.
And the 1.6million with an Investment Account will see rates fall from 0.8 per cent to 0.6 per cent.
Customers holding Guaranteed Growth Bonds, Guaranteed Income Bonds, and Fixed Interest Savings Certificates may also see rates change when their savings mature.
So those whose investments mature on or before June 1 and who automatically renew into a new issue of the same term, will receive the previous, higher interest rate.
But those who renew into a new issue with a different term of length, will see rates cut.
In the latter scenario, NS&I's 721,000 Guaranteed Growth Bond holders will see a dip in rates from 1.25 per cent to 1.10 per cent for its one-year account and from 1.45 per cent to 1.2 per cent for its two-year account.
The rate on its three-year account will fall from 1.7 per cent to 1.3 per cent, while it's five-year account rate will drop from 2 per cent to 1.65 per cent.
On Guaranteed Income Bonds, which 49,000 people hold, rates will fall from 1.21 per cent to 1.06 per cent over one year, and from 1.41 per cent to 1.16 per cent over two years.
Meanwhile, over three years they'll drop from 1.66 per cent to 1.26 per cent, and over five years its changing from 1.97 per cent to 1.61 per cent.
Lastly, the rate on NS&I's Fixed Interest Savings Certificates, which 680,000 people hold, is falling from 1.3 per cent to 1.15 per cent for the two-year account, and from 1.9 per cent to 1.6 per cent for the five-year account.
It's worth pointing out though that only the five-year Guaranteed Growth Bond at 2 per cent had a market leading rate, joint with Aldermore and United Trust Bank, and even then it was only available to existing savers renewing a maturing Bond.
Check if you can switch and save
Sarah Coles, personal finance analyst at financial provider Hargreaves Lansdown, said: "It’s yet another blow for loyal NS&I savers, who treasure the fact their savings are 100 per cent guaranteed by the government, and have lived with increasingly uncompetitive rates in order to stick with the institution.
"It’s not all the NS&I’s fault. Its hands are tied, because it needs to offer value for money compared to government debt, and rates are so ridiculously low at the moment that the only way to compete is by offering something horribly uninspiring to savers."
Ms Coles added: "You don’t need to sit back and take this though, this should be all the incentive you need to check out the competition and make your money work harder.”
Use a comparison tool, such as , to find the best interest rate for your cash.
Rachel Springall, finance expert at Moneyfacts said: “It seemed almost inevitable for NS&I to cut its savings rates because of the downward trajectory of the rest of the savings market."
Ian Ackerley, NS&I chief executive, said: “Reducing interest rates is always a difficult decision. We need to ensure our interest rates are set at an appropriate position against those of our competitors.
"These changes reflect NS&I’s requirement to strike a balance between the needs of our savers with taxpayers and the stability of the broader financial services sector.”
More on money
For more information, see our guide on what are Premium Bonds, where can I buy the UK’s biggest savings product and how to check if I have won?
It comes as 1.6million people are owed almost £77million in unclaimed Premium Bonds – check if you’ve won.