NS&I lowers Premium Bond prize fund rate once more - consider whether to withdraw yours?
In a recent announcement, National Savings & Investments (NS&I) has revealed that it will be reducing the Premium Bonds prize fund rate from 3.80% to 3.60%, effective from the August 2025 draw. This marks the fifth cut to the prize fund rate since March 2024, and comes as a response to the broader shifts in the savings and interest rate environment.
The adjustment aims to balance the interests of savers, taxpayers, and the stability of the financial services sector. Despite the rate cut, Premium Bonds continue to offer unique benefits such as complete security backed by HM Treasury, flexible withdrawals, and the chance to win tax-free prizes each month.
**Impact on Prize Quantities and Odds**
The odds of winning a prize remain at 22,000 to 1 for each £1 bond, meaning individual chances of winning each month remain unaffected. However, the total prize fund for the August 2025 draw is expected to be approximately £396 million—almost £20 million less than in June 2025. Despite this decrease, the number of prizes is set to rise slightly, with over 6 million prizes available.
This means the prize fund cuts are being absorbed by a shift towards more but smaller-value prizes. Over 80% of the August prizes are expected to be in the smallest categories (£25, £50, or £100). The average effective return for savers will dip slightly because a higher proportion of winners will receive lower-value prizes, making it less likely for individual savers to win large sums, and maintaining the risk that many Premium Bond holders might not win at all.
**Summary Table**
| Factor | Before August 2025 | From August 2025 | |------------------------|---------------------------|--------------------------| | Prize Fund Rate | 3.80% | 3.60% | | Odds of Winning | 22,000 to 1 | 22,000 to 1 (no change) | | Number of Prizes | Slightly lower (June 2025 data) | Over 6 million (slight increase) | | Prize Fund Value | ~£416 million (June 2025) | ~£396 million (Aug 2025) | | Prize Distribution | More mid-to-high value | More low-value prizes |
**Key Takeaway:** The prize fund rate cut means the total prize pot will be smaller, but NS&I is distributing more, lower-value prizes, while keeping the odds of winning unchanged. Savers may notice a slight decrease in average returns, especially from less chance of winning larger prizes.
It is important to note that the prize fund rate for Premium Bonds has been steadily falling since September 2023, with a previous cut to 3.8% in April 2025. The two £1 million jackpot prizes will remain, while there will be 15 fewer £25,000 prizes, 151 £50,000 prizes (a decrease from the current 159), 38 fewer £10,000 prizes, and four fewer £100,000 prizes from August, with 75 remaining.
Andrew Westhead, NS&I retail director, stated that the adjustment to the Premium Bonds prize fund rate reflects the changing landscape for savings. The major attraction of Premium Bonds lies in receiving tax-free prizes and the potential to win a life-changing sum of money, while being able to withdraw money fairly easily.
Currently, the best buy easy-access accounts pay up to 4.75%, providing an alternative for those seeking higher returns on their savings. The Bank of England held the base rate at 4.25% last week.
- The adjustment in the Premium Bonds prize fund rate is part of a broader strategy, considering the interests of savers, taxpayers, and the financial services sector, as outlined by National Savings & Investments (NS&I).
- Given the shifting landscape of personal-finance and savings, investors might consider diversifying their portfolios, considering alternative investment options like the best buy easy-access accounts that offer higher returns than the new Premium Bonds prize fund rate.
