Premium Bonds holders may able to get better returns (Image: Getty)
Premium Bonds savers have been issued an update about the NS&I scheme. The update comes as some major changes to the scheme are just around the corner.
From the April draw, NS&I is to reduce the prize fund rate from the current 3.6 percent down to 3.3 percent. The odds of winning for each £1 Bond will fall from 22,000 to one down to 23,000 to one. It’s worth bearing in mind that even if you do win a prize, the vast majority of them are for very small amounts, such as £25 and £50.
Yet the fact remains you can go months or even years without winning a penny. Experts at ISA and pensions provider AJ Bell have sourced data from NS&I that shows more than six in 10 customers have never won anything.
This means more than 14.2 million Bond holders have had zero return on their investment. The best way to increase your chances of a win are to buy more Bonds. You can hold up to £50,000 in Bonds.
The research found that just six percent of prizes paid out between February 2025 and January 2026 went to people with £10,000 or less in holdings. Given the dwindling odds of bagging a prize, customers may be thinking of cashing in their Bonds.
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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 looking at?
Ms Suter explained some of the options you could look at if you are thinking of diversifying your savings away from Premium Bonds. She said: “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’s worth noting here that the ISA allowance will be changing soon. At present, you can deposit up to £20,000 each tax year divided as you choose between cash ISAs or stocks and shares ISAs.
But from April 2027, £8,000 of this allowance will only be available for investment-based accounts, so you can only put away up to £12,000 as you decide.
Ms Suter spoke about another account you could go for. She said: “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 Bonds prize fund rate fall again this year?
Another question is if we could see further rate cuts for Premium Bonds over the months ahead. NS&I slashed the prize rate three times in 2025, as the base interest rate set by the Bank of England has also fallen over the past year.
Ms Suter said: “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.
“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.”