The odds of a £1 Bond number winning a prize on NS&I's popular Premium Bond lottery investment have been lengthened from 24,000/1 to 26,000/1 after the savings bank announced a reduction in the annual Premium Bond rate will come into effect from August 1.
As the interest rate has dropped from 1.5% to 1.3% the prize fund will see a dip from it's current £57.1 million total monthly payout to £49.3m. While the 22 million investors who hold a Premium Bond number will therefore suffer a blow, the maximum prize of £1 million per month will still be in effect, however, there will no longer be five recipients of £100,000 - from August, there will be just three.
‘Rates across the savings market have fallen over recent months, resulting in NS&I savings being increasingly attractive,' claimed chief executive of NS&I Jane Platt, as quoted by citywire.co.uk. 'To ensure we stay within our net financing target – and in light of our framework to balance the needs of our savers, taxpayers and the stability of the broader financial service sector – we now need to reduce the Premium Bond prize fund rate.’
Changes to the Premium Bond payout
|PAYOUT||CURRENT PRIZES||AUGUST CHANGES|
N.B Figures for August changes are based on an estimate and sourced from NS&I
Introduced in 1956 by Harold MacMillan in an effort to encourage saving and reduce inflation, Premium Bonds have become more popular this year as savers have not been able to find an attractive return, particularly in what the alternatives to Premium Bonds are: cash ISAs, easy-access and fixed-rate savings rates from private sector providers, for instance, have all experienced reductions in the last 12 months.
While the August changes will no doubt trigger the ire of investors, there are still 1,751,061 prizes to be awarded to 22 million holders. Premium Bond returns also carry the benefit of being tax-free.
image: © Tax Credits