Key changes to Premium Bonds in 2025 announced by NS&I

NS&I has unveiled significant changes for Premium Bond holders, set to take effect from January 2025. The government-backed savings institution announced that the prize fund rate for Premium Bonds will become less generous, seeing a decrease from 4.15 percent to 4 percent.

This follows an imminent reduction in the December draw from 4.4 percent to 4.15 percent. Despite the rate cut, January's odds of winning will remain unchanged from December at 22,000 to 1. However, there will be a slight decline in the number of higher-value prizes.

January will offer an estimated 82 prizes of £100,000, one fewer than December, and 166 prizes at £50,000, down by one from the previous month. Nonetheless, the estimated quantity of £1 million prized awards is to stay constant at two.

In January, a boost is anticipated for the lower-value £25 prizes, with a forecasted increase to 1,815,854, up from December's 1,509,458. NS&I, supported by the Treasury, aims to maintain equilibrium between the needs of savers, taxpayers, and the broader financial market, reports the Manchester Evening News.

After this year saw the Bank of England base rate cut twice, NS&I Retail Director Andrew Westhead informed customers: "We carefully review our savings rates in response to changes in the broader market. These adjustments help us meet our net financing target while balancing the interests of our savers, taxpayers and the wider financial services sector.

"Premium Bonds remain a popular choice for millions of savers, backed by the 100 percent Government guarantee, with the January 2025 draw set to deliver over 5.8 million tax-free prizes worth more than £431 million."

NS&I also announced that from December 20, the interest rate for its Direct Saver will decrease to 3.5 percent AER and Income Bonds to 3.49 per cent AER, down from 3.75 percent.

According to Laura Suter, director of personal finance at AJ Bell: "The rates are now significantly below the top rates in the market, meaning savers are paying a decent premium for the safety and brand name of NSandI. Anyone with money in easy access NSandI accounts should weigh up whether they would be better switching to a rival to clinch some extra interest."