The total value of prizes available to premium bond holders is set to nearly halve as National Savings & Investments changes its prize structure in response to the Bank of England’s rate reductions.
While this month’s prize pot totals some £58.9 million, in April just £32.2 million is expected to be dished out.
In addition, the chances of winning a million pound prize on the premium bonds has halved. The government backed body will now offer £25 prizes, but will only give away one - rather than two - monthly £1 million jackpots as it seeks to increase the number of winners.
Overall, it is cutting the annual payout rate from 1.8% to 1%. The prize money is a percentage of the funds committed to Premium Bonds and NS&I links the percentage payout to Bank of England Base Rate.
The new level of Premium Bond payouts will be held for at least three months.
While very popular – at the end of November 2008, about 23 million people had some £39 billion stashed in Premium Bonds – they are not without their critics who suggest people view Premium Bonds as a gamble and not an investment.
NS&I says that despite its changes, the current odds of each £1 Premium Bond number winning any prize will remain unchanged at 36,000 to 1. ‘We always aim to reward as many of our customers as possible from the prize fund available, together with having the right mix of prizes,’ Peter Cornish, director of customer offer at NS&I said.
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