Millions of Premium Bonds holders across the UK are being urged to take note as National Savings and Investments (NS&I) prepares to make another change to its prize rate – sparking concerns over further reductions in returns.
NS&I Rate Cuts Could Continue, Say Experts
Financial analysts have warned that further cuts to NS&I rates may be on the way, following a significant shift in fundraising targets.
Sarah Coles, head of personal finance at Hargreaves Lansdown, commented: “Premium Bond woes may continue even after the NS&I fundraising target increases.”
She pointed out that the substantial influx of money into NS&I during the third quarter is a key reason behind the recent wave of rate cuts.
“We’re yet to get the latest of these cuts – the Premium Bond prize cut set for April – when it falls from four per cent to 3.8 per cent. The question for many savers is whether this will be the last.”
According to Ms Coles: “The rush into NS&I in the third quarter shows how much pent-up demand there is. Sadly for bond holders, it means this is unlikely to be the last of the cuts to the prize rate.”
Savvy Savers Urged to Consider Alternative Options
Experts from Hargreaves Lansdown are encouraging savers to explore more rewarding alternatives, particularly for emergency funds.
They explained: “For more savvy savers, the right home for their emergency fund is a competitive savings account. And right now, a number of them are still offering returns well ahead of inflation, so you know your money will be there when you need it.”
Online platforms like Active Savings are gaining popularity among savers looking for flexible, higher-yield options.
“An online savings platform, like Active Savings, brings some of the best rates on the market from different banks through one account. It means you can switch banks to find better rates, without wasting time completing lots of paperwork for new accounts. Bear in mind that rates could be added and withdrawn at any time.”
NS&I Defends Rate Changes
In response to the concerns, an NS&I spokesperson stated: “NS&I reviews the interest rates on all of its products regularly and makes changes when they are appropriate, to ensure that it balances the interests of savers, taxpayers and the broader financial services sector.”
Key Takeaways for Premium Bond Holders
1. Premium Bond Prize Rate Cut Coming in April 2025
NS&I has confirmed that the Premium Bond prize rate will drop from 4.0% to 3.8% starting April 2025. This marks yet another reduction following a series of rate cuts, affecting millions of savers who rely on Premium Bonds for monthly prize-based returns.
2. Financial Experts Warn of More Cuts to Come
According to industry professionals, including Hargreaves Lansdown’s Sarah Coles, this upcoming rate cut may not be the final one. The organisation’s large fundraising intake in the third quarter signals that more reductions could be on the way. Savers are advised to stay vigilant.
3. Savers Encouraged to Seek Better Returns Elsewhere
With Premium Bonds becoming less rewarding, financial advisors are recommending that individuals consider high-interest savings accounts as a safer, more reliable option for growing their money. Many of these accounts are still offering returns above inflation, ensuring your savings maintain their value over time.
4. Online Savings Platforms Offer Greater Flexibility
Services like Active Savings allow users to access competitive interest rates from multiple banks through a single platform. This simplifies the process of switching between providers and ensures that savers can move their funds easily without the hassle of opening new accounts repeatedly.
5. NS&I Balancing Priorities Between Savers and Taxpayers
In defence of the changes, NS&I stated that it regularly reviews all its rates to strike a balance between rewarding savers, protecting taxpayers, and supporting the broader financial system. While this may lead to disappointing returns for some, the organisation stresses that its approach is part of a larger economic strategy.
