Laura Suter, director of personal finance at AJ Bell, said: “The Premium Bond prize fund is being cut again.
“The prize fund rate will be cut to 3.3 per cent from the April prize draw, down from the current 3.6 per cent and down from a peak of 4.65 per cent seen in September 2023.
“What’s more, the odds of winning are widening to 23,000 to 1, which means holders are even less likely to win a prize from April.
“The rates are now significantly below the top rates in the market, meaning savers are paying a hefty premium for the safety and brand name of NS&I.
“The top easy-access account on the market pays 4.5 per cent interest, meaning that someone with £20,000 of savings will be sacrificing £240 of interest a year by opting for Premium Bonds.
“But that also assumes they get the average return on the account – which many don’t.
“The Premium Bond ‘prize fund rate’ is intended to give savers some comparison with how the account compares to normal savings accounts.
“But it could be misleading for many savers, as the ‘effective rate’ is the average return you would get based on having average luck in the prize draw.
“Clearly not everyone has ‘average’ luck, otherwise the prizes would be handed out equally to every saver.
“The fact that there are some very large prizes also skews the figures – as it means that for every person who wins £1 million or £100,000 there will be hundreds who win nothing.
“Savers with money in Premium Bonds should really think about whether the account is right for them.
“Considering many Premium Bond holders will never win a prize and the average expected return is lower than the top easy-access account, savers could well be better off with a guaranteed return elsewhere.
“A Freedom of Information (FOI) request obtained by AJ Bell revealed that nearly two-thirds of Premium Bond holders, equivalent to just under 14.4 million people, have never won a prize.
“There is a whopping £127.7 billion sat in Premium Bonds, with the average overall holding coming in at £5,406.
“However, the average holding for the 5.1 million Premium Bond holders who won in the last 12 months sits at £23,397, with 80 per cent of those winners winning more than once during that period (based on data obtained by AJ Bell from the NS&I via a Freedom of Information request, accurate as of March 18 2025. The number of current holders who have not won a prize is based on data from February 1994 onwards and includes new holders who were not eligible as their Bonds were not beyond one month purchased).
“When you factor in that many people will have been holding Premium Bonds for decades, perhaps receiving them as gifts when they were young, that means they may have missed out on significant returns in a higher paying cash account or by investing.
“Despite interest rate cuts, these accounts are still likely to continue to be very popular as they are backed by NS&I and many savers have huge brand loyalty to the organisation.
“There are a few groups where Premium Bonds are a very attractive option, but for most the safety of a regular interest rate will be better, and savers may want to shop around for the best rates on offer.”
Contact details are available to account holders.
Create a free account to get in touch with this expert.