MARTIN Lewis’ Money Saving Expert has warned of a major change coming to Premium Bonds.
National Savings and Investments (NS&I) will decrease its Premium Bonds prize-fund rate to 4.4 per cent from 4.65 per cent for its March 2024 draw and beyond.
While the distribution of prizes already changes each month, this means fewer big money prizes will now be on offer for bondholders.
Premium Bonds are essentially a savings account that doesn’t earn interest – instead, there’s an annual prize fund rate that funds a monthly prize draw for tax-free prizes.
These prizes range from £25 to £1million.
However, with more than 24 million people investing in Premium Bonds, the odds of winning at least £25 – the lowest prize possible – are already 21,000/1, according to NS&I.
The chances of winning the £1million jackpot in any given month with just one bond are roughly one in 60 billion, while the likelihood of winning nothing is a virtual certainty.
As a result of the prize-fund rate decrease, normal savings will now be even more likely to beat Premium Bonds because of their guaranteed interest return, reports Money Saving Expert.
With this in mind, Premium Bond members can try two alternatives for better savings rates.
The first is with easy-access savings, where it’s possible to get more than 5.2 per cent.
The second option is to lock your savings away in a one-year fix, which offers rates of 5.3 per cent.
Despite the dip in savings rates, the amount you need in Premium Bond savings before you start to pay tax on it is still around the lowest point it’s been since the introduction of the personal savings allowance in 2016.
For a full rundown on what Premium bonds are and how they work, you can read our guide here.
Elsewhere, Mr Lewis’ Money Saving Expert has revealed the exact rate you should get on savings – and why you shouldn’t accept less.
Savers have benefited from the best interest rates in 2023, after years of meagre returns.
And the finance expert has also revealed a clever £1 savings trick to help get you on the housing ladder – with no risk.
The Money Saving Expert explained how you can open a Lifetime ISA (LISA) with the bare minimum just to get the clock ticking.
