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Highlights:
- NS&I reduces Premium Bond prize rate to 4.15% with odds of winning worsening to 22,000:1.
- Direct Saver and Income Bonds interest rates will be lowered on 20 November 2024.
- New British Savings Bonds launched with reduced rates of 4.10% gross/AER for the Growth Bond and 4.02% gross for the Income Bond.
National Savings and Investments (NS&I) has announced a reduction in the prize rate for Premium Bonds from 4.4% to 4.15%, effective from the December 2024 draw. Along with this decrease, the odds of winning will worsen from 21,000:1 to 22,000:1, marking the first prize rate cut since March 2024. This decision comes as part of NS&I’s efforts to balance the needs of savers, taxpayers, and the financial services sector amid changing market conditions.
Andrew Westhead, NS&I’s retail director, explained the adjustments, citing the need to lower rates to meet the institution’s Net Financing target. He emphasized the importance of maintaining balance between the interests of savers and the broader financial system while adapting to market shifts.
In addition to the Premium Bond changes, NS&I will lower interest rates on other key savings products starting on 20 November 2024. The Direct Saver rate will drop to 3.75% gross/AER, while Income Bonds will see a reduction to 3.69% gross (3.75% AER). These changes align with broader trends in the easy access savings market, which has seen a wave of rate cuts.
Sarah Coles, head of personal finance at Hargreaves Lansdown, commented on the Premium Bond changes, noting that the prize rate reduction was widely anticipated. She highlighted the challenges facing savers as NS&I follows the trend of lowering savings rates across the market, reducing the chances of winning with Premium Bonds.
NS&I also launched new two-year British Savings Bonds on 22 October 2024, offering lower returns compared to previous rates. The Guaranteed Growth Bond now offers 4.10% gross/AER, while the Guaranteed Income Bond provides 4.02% gross (4.09% AER), both representing a decrease from earlier offerings.
These changes reflect the broader trend in the savings market, where institutions are adjusting rates to reflect evolving economic conditions and financial targets.
