The Premium Bond prize rate cut is the second in a row, in December it will be slashed from 4.4 per cent to 4.15 per cent in December, although the odds of winning a prize in January will remain at 22,000 to one.
The cut is not the only blow for savers.
From Friday, December 20, 2024, interest on the National Savings and Investments (NS&I) direct saver account will fall from 3.75 pre cent to 3.50 per cent, while those holding NS&I income bonds will see their interest rate dip from 3.75 oer cent to 3.49 per cent AER.
Andrew Westhead, NS&I Retail Director, said: “Premium Bonds remain a popular choice for millions of savers, backed by the 100% government guarantee, with the January 2025 draw set to deliver over 5.8 million tax-free prizes worth more than £431 million.
The January 2025 Premium Bonds draw is expected to have over £431 million in the prize fund with over 5.8 million prizes, ranging from two £1 million prizes to over 1.8 million £25 prizes.
|
Current prize fund rate (from December 2024) |
Current odds (from December 2024) |
New prize fund rate (from January 2025) |
Odds (no change) |
|
4.15% tax-free |
22,000 to 1 |
4.00% tax-free |
22,000 to 1 |
Value of Premium Bonds prizes
|
Value of prizes |
Number and total value of prizes in November 2024 |
Number and total value of prizes in December 2024 (estimate) |
Number and total value of prizes in January 2025 (estimate) |
|
£1,000,000 |
2 |
2 |
2 |
|
£100,000 |
89 |
83 |
82 |
|
£50,000 |
177 |
167 |
166 |
|
£25,000 |
356 |
332 |
329 |
|
£10,000 |
887 |
830 |
823 |
|
£5,000 |
1,766 |
1,664 |
1,648 |
|
£1,000 |
18,558 |
17,426 |
17,277 |
|
£500 |
55,674 |
52,278 |
51,831 |
|
£100 |
2,224,815 |
2,072,099 |
2,001,028 |
|
£50 |
2,224,815 |
2,072,099 |
2,001,028 |
|
£25 |
1,498,592 |
1,509,458 |
1,815,854 |
|
Total: |
Total 6,025,741 prizes £463,982,050 |
Total 5,726,438 prizes £435,686,300 |
Total 5,890,068 prizes £431,938,050 |
Interest rates on NS&I saving accounts
|
Product |
Current interest rate (from 20 November to 20 December 2024) |
Interest rate from 20 December 2024 |
|
Direct Saver |
3.75 per cent gross/AER |
3.50 per cent gross/AER |
|
Income Bonds |
3.69 per cent gross/3.75 per cent AER |
3.44 per cent gross/3.49 per cent AER |
Sarah Coles, head of personal finance, Hargreaves Lansdown said between November and January, the rate on Premium Bonds will have dropped from 4.4 per cent to 4 per cent.
She warned most savers will get far less than this.
“It’s unlikely to put enthusiastic savers off the product, but it should make them think twice about the interest they’re missing out on elsewhere.
“We know Premium Bond fans are unlikely to vote with their feet in huge numbers. The product is a national treasure, and an awful lot of people are wedded to them for life. They’ve faced pretty some dire prize rates in the past when rates were lower, so they’ve lived through worse than this.”
Coles said savers who held Premium Bonds should understand how they work,
“In the interim, the slight resurgence of inflation means your money will be losing more spending power. If you’re happy with this trade off, you may choose to stay put. However, if you want to switch, there are still plenty of decent rates on offer in the easy access savings market.
“Some people will be hanging on because they have a large sum of savings they want to see in one place, without worrying about busting protection limits (elsewhere only the first £85,000 with each institution is protected). However, cash savings platforms offer a decent alternative. They let you spread the cash between different banks, and still see it all in one place – without sacrificing the rate.”
