Premium Bonds holders facing another cut to the prize fund rate have been urged to see if they could get a better return on their savings elsewhere.
NS&I has announced that from the August draw, the prize fund rate will fall from the current 3.8% down to 3.6%. The odds of each £1 Bond winning will stay the same at the current 22,000 to one.
This follows rate cuts in January and in April, as well as in December last year, raising the question of whether the rate will continue to drop.
Jesse Kleis, legal expert at Future Bail Bonds, urged customers to think through whether Premium Bonds are still the right choice for them.
He said: “The recent cut to the Premium Bonds prize rate is another signal that savers need to stay alert. NS&I’s latest adjustment is part of a downward trend: rates fell to 4.0% in January, 3.8% in April, and now 3.6% in August.
“Meanwhile, nearly two-thirds of bondholders have never won anything, suggesting that average returns often fall below the headline prize fund rate.
“While Premium Bonds offer an element of excitement and risk-free security, their value as a financial tool is weakening, especially when compared to traditional savings accounts that now offer more predictable and competitive returns.”
He pointed to one particular group who in particular may want to make a change to their savings: “Premium Bonds may still suit those who prioritize capital protection and enjoy the thrill of a potential win, particularly older savers or those with emergency savings already secured.
“However, younger investors or anyone relying on stable, passive income may want to shift toward higher-yield savings or ISAs, where your money works harder without relying on luck.”
Mr Kleis also said that Premium Bonds do not compare well with rates with other high-paying savings accounts, as you can get rates of 4.5% or 5%, and with the guarantee of interest earnings, whereas there is no guarantee of a prize with Premium Bonds.
The expert said all savers should regularly review how their savings are arranged. He said: “If you’re holding a large amount in Premium Bonds without seeing returns, consider rebalancing into a high-yield account or fixed-rate bond.
“And yes, further cuts are possible this year if interest rates trend downward. The prize rate could feasibly drop to 3.75% or below.”
Another finance expert warning now may be the time for Bond holders to switch is Will Stevens, head of wealth planning at Killik & Co.
He explained: “If you are not receiving a competitive rate from your bank, Premium Bonds can make a great alternative to holding cash at the bank.
“However, if you are looking for a longer-term saving mechanism, especially compared to fixed-rate savings accounts, you are best to consider more conventional investment options, like equities or funds, first.
“Premium Bonds can play a role in a diversified savings portfolio but are generally most effective for short-term strategies seeking reliable and predictable returns.”
