A premium bond is effectively a savings account from National Savings and Investments (NS&I), into which you can deposit between £100 and £30,000. What makes premium bonds different to standard savings accounts is that instead of earning interest on your invested money, you enter a monthly prize draw, with the chance of winning between £25 and £1million.
From the 1st August, the National Savings and Investments (NS&I) slashed the interest rate on Premium Bonds from 1.5% to 1.3%, in turn reducing the odds of winning a prize. There will now be only three prizes of £100,000 each month, rather than five, with other prize odds also falling.
Jane Platt, chief executive of NS&I, said: “Rates across the savings market have fallen in recent months, resulting in NS&I savings becoming increasingly attractive.
“To ensure we stay within our net financing target and balance the needs of savers, taxpayers and the stability of the broader financial services sector, we need to reduce the Premium Bond prize fund rate.”
The £1million top prize is unchanged, but there will be just three £100,000 prizes a month, instead of five. There will only be six £50,000 prizes, instead of nine and the number of £25,000 prizes will fall from 20 to 11.
Low savings rates mean premium bonds have been looking increasingly more attractive to those willing to invest, resulting in £1.5bn bonds being purchased in the last 12 months. While the August changes will no doubt annoy investors, there are still 1,751,061 prizes to be awarded to 22 million holders. Premium Bond returns also carry the benefit of being tax-free.
However, investors need to remember that when reviewing or considering any investment opportunity, it is important to seek financial advice to help you make the most of your finances. At Retirement and Investment Solutions, we tailor advice and recommendations to your personal circumstances, ensuring that your investments work for you and your needs.