NS&I is changing the rules for Premium Bonds soon
Premium Bonds holders may able to get better returns(Image: Getty)
Premium Bonds holders have received fresh information regarding the NS&I scheme – and people may want to make an account change to get better returns. The update comes as major changes to the scheme will soon take effect.
Beginning from the April draw, NS&I will lower the prize fund rate from its present 3.6 per cent to 3.3 per cent. Additionally, the chances of winning for each £1 Premium Bond will decrease from 22,000 to one to 23,000 to one. It is important to note that even successful prizes are typically for modest sums, such as £25 and £50. However, it is possible you can have prolonged periods without taking home a prize – potentially months or years. Financial experts at ISA and pensions provider AJ Bell have requested NS&I data revealing that over six in 10 customers have never claimed a prize.
This equates to more than 14.2 million Bond holders who have seen absolutely no returns on their investment. To improve your probability of success, purchasing additional Bonds is the most effective strategy.
The maximum holding permitted is £50,000 in Bonds. The study revealed that merely six percent of prizes distributed between February 2025 and January 2026 were awarded to people holding £10,000 or less in Premium Bonds.
With the diminishing chances of securing a prize, savers may be considering withdrawing their funds from Premium Bonds. Laura Suter, director of personal finance at AJ Bell, said: “The rates on Premium Bonds are now significantly below the top savings rates in the market, meaning savers may be sacrificing returns for the safety and brand name of NS&I.
“Many people would likely be better off putting their cash into a standard easy-access savings account where they can earn interest, rather than relying on the chance of winning a prize. Considering that many Premium Bond holders never win anything and the expected return is lower than the best easy-access accounts, savers could well be better off with a guaranteed return elsewhere.”
What alternatives to Premium Bonds are worth considering?
Ms Suter outlined several options worth exploring if you’re looking at moving your savings away from Premium Bonds. She explained: “Using a Cash ISA will protect people’s savings from tax – as one of the perks of Premium Bonds is that the prize is tax free.
“You can pay up to £20,000 per tax year into an ISA, and the deadline for this year is fast approaching. Or if you’ve maxed out your ISA already this year, you can opt for a non-ISA easy-access account.”
It is important to note the ISA allowance will be changing shortly. Currently, you can save up to £20,000 each tax year, split as you wish between cash ISAs or stocks and shares ISAs.
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However, from April 2027, £8,000 of this allowance will be restricted to investment-based accounts only, meaning you’ll be able to put away just £12,000 as you choose.
Ms Suter discussed another potential home for your savings. She explained: “Another option if you know you don’t need access to the money immediately is to use a fixed rate account, which may pay more interest. But you can’t usually access this money before the end of the term, so you have to be certain you won’t need it.
“Alternatively, if you won’t need the money for five or more years you could consider investing it for a potentially higher return. By taking a bit more risk with the money, you could boost your returns – as over the long term investing has generally outperformed cash. If you do this in an ISA your gains will be protected from tax too.”
Could the Premium Bondsprize fund rate drop again this year?
Another consideration is whether we might see additional rate reductions for Premium Bonds in the coming months. NS&I axed the prize rate three times in 2025, as the base interest rate set by the Bank of England has also declined over the past year.
Ms Suter commented: “Premium Bonds are hugely popular accounts, and it’s no surprise that NS&I recently cut the prize draw, as more people flock to the accounts. The upcoming changes to Cash ISAs mean more people may move to Premium Bonds as an ISA alternative.”
She added: “Our own research found that a quarter of people would opt for Premium Bonds if the cash ISA limit was cut. All of this means that NS&I doesn’t need to offer such high returns to attract customer money – which may lead to more prize fund cuts in future.
“However, NS&I also base the Premium Bond expected prize fund rate on future interest rate expectations and what other savings providers are doing. The path for the Bank of England’s rate changes now doesn’t look as clear, so it’s harder to say which way savings rates will swing.”
