NS&I Premium Bonds prize rate cut from April - are they worth buying?

The National Savings and Investments (NS&I) prize fund rate for its Premium Bonds will drop from 4% to 3.8%, having already been slashed from a 17-year high of 4.15% in January.

While the chance of winning will remain at a one in 22,000 chance, the distribution of prizes will change, with fewer top prizes up for grabs.

Premium Bonds do not pay an interest rate to investors, but instead NS&I carries out a draw and hands out millions of cash prizes every month.

Winners get between £25 and £1 million, with more than 5.8 million prizes handed out in February 2025 alone.

The number of prizes is actually increasing from 5.8 to 5.9 million, however, there will be fewer prizes worth £50 and higher, with additional £25 prizes added to the fund.

There are always two £1 million giveaways, with the rest of the prizes depending on the size of the monthly fund.

In February 2025, 82 £100,000 prizes were also given out, as well as more than 17,000 £1,000 prizes.

Are Premium Bonds worth buying?

The Premium Bonds rate may have dropped but this does not necessarily mean you will get less money back on your savings.

Unlike traditional savings accounts, Premium Bonds do not pay a guaranteed interest rate. If you want a return on your investment, you will be counting on a bit of luck as well, as Premium Bonds pay out to those randomly picked in the monthly draw.

Each bond costs £1, and each £1 bond has a chance of winning up to £1 million every month.

Many low-level investors choose to buy Premium Bonds when interest rates are low because they wouldn't get much money back in interest payments, so they may feel there is not much to lose.

They also have the benefit of being able to access their savings whenever they want, with no penalty for withdrawing, unlike with fixed rate savings accounts which offer the best interest.

When interest rates are high, savers may want to shop around for deals which have a guaranteed financial reward.

As of March 28 2025, NimbleFins' Best Savings Account Guide shows Monument, Atom and Chase are all offering 4.75% interest on an easy access saving account (with a varying minimum deposits required).

Birmingham is offering a 4.67% fixed rate for one year.

These returns are guaranteed, unlike Premium Bonds. And they are higher than the 3.8% being offered by Premium Bonds. Of course, that 3.8% is not a guaranteed return, and you may not get anything at all.

However, for someone with a lot of savings, they may wish to buy Premium Bonds to avoid paying income tax on their interest.

Basic rate taxpayers pay 20% on anything they earn over £1,000. Higher rate taxpayers start paying tax on any interest over £500, at the higher rate of income tax (40%). Those in the additional income tax band have no savings interest threshold, so will pay the additional rate on everything they earn. The percentage of tax you pay is the same as your usual income tax band.

In February 2025 there were more than 1.8 million £25 prizes handed out, 2m £50 prizes and 2m £100 prizes.

A total of £430,052,425 was handed out in more than 5.8m prizes.

For more information on Premium Bond prizes click here.

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