Premium Bonds savers frustrated to learn the prize fund rate will be dropping have been warned their chances of taking home a prize could drop further.
Provider NS&I has announced the prize fund rate will fall from 4.4 percent down to 4.15 percent from the December draw. The odds of winning for each £1 Bond will likewise fall, dropping from 21,000 to one, to 22,000 to one.
With the reduction, there will be some 260,000 fewer prizes in the December draw compared to October, although there will still be two jackpot prizes for £1million.
Steven Kibbel, financial planner and chief editorial advisor at Gold IRA Companies, warned Premium Bond savers that they “can’t count on them as a solid way to grow your savings anymore”.
He explained: “We’ve already seen cuts, and more could follow. NS&I adjusts its rates depending on a lot of factors, and they’re not immune to the economic shifts we’re all dealing with.
“It’s smart to keep an eye on alternatives and spread out where you put your money. Relying on Premium Bonds alone doesn’t cut it for most people these days. You want stability, and unfortunately, Premium Bonds just aren’t offering that right now.”
Winning Bonds in the monthly prize draw are chosen at random with each £1 Bond having an equal chance of winning. Prizes range from £25 up to £1million, with several large cash prizes for £100,000 and £50,000.
In announcing the rate cuts, Andrew Westhead, NS&I Retail Director, said: “As the savings market continues to change, we need to lower the rates on some of our products to help us meet our Net Financing target, while also ensuring we continue to balance the interests of our savers, taxpayers and the broader financial services sector.
“Even with the changes, we’re still expecting to pay out over 5.7 million prizes worth over £435million in the December Premium Bonds draw.”
NS&I is also cutting the rate on its Direct Saver and Income Bonds from November 20, with the rate dropping from 4 percent to 3.75 percent.
Turning to alternatives to Premium Bonds, Mr Kibbel said: “People should consider where they are in life and what their savings goals are. If you’re after long-term growth, focus on accounts that guarantee returns.
“If you’re okay with a little uncertainty, then maybe keep some money in Premium Bonds, but I wouldn’t bet on them being your main savings vehicle anymore.”
Rates for NS&I’s British Savings Bonds have also dropped: the Guaranteed Growth Bonds now pays 4.1 percent, down from 4.25 percent, while Guaranteed Income Bonds are at 4.02 percent, down from 4.17 percent.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said the relatively new British Savings Bond may not last much longer.
She warned: “They’ve only been on sale since August, and at this rate their days may be numbered. You can do far better elsewhere, with the best on the market offering 4.6 percent.
“And while the Treasury guarantee of your savings and the attraction of the brand will go a long way, for plenty of people it’s not going to make up enough ground. These bonds look unlikely to shake or stir anyone.”
