NS&I cuts Premium Bonds rate to 3.8% and Income Bonds will fall to 3.26% – should you

National Savings and Investments will cut the underlying rate of Premium Bonds to 3.8 per cent from the April 2025 draw.

The odds remain at 22,000 to 1, but it means there will be four fewer £100,000 prizes from April, down from 82 to 78.

Meanwhile, there will 157 £50,000 prizes, down from 164 currently. There will be 15 fewer £25,000 prizes and 39 fewer £10,000 ones. The two £1million jackpot prizes remain.

NS&I says it has cut the rates in ‘response to changes in the savings market.’ 

Earlier in the month, the Bank of England reduced base rate from 4.75 to 4.5 per cent, and major banks were quick to make cuts to their already poor savings rates.

Premium Bonds hit a high of 4.65 per cent from September 2023. The April move will be the fourth cut since.

Rate cut: The underlying rate on Premium Bonds will fall from 4% to 3.8% in April 2025

Elsewhere, NS&I is also cutting the rates on its popular Income Bonds from 5 March, which pay out monthly interest. This will fall to 3.26 per cent from 3.44 per cent.

Income Bonds were paying as much as 3.93 per cent in May 2024 and this is the third cut since.

These accounts allow £1million to be held inside them, fully backed by the Government – but unlike Premium Bonds, they are not tax-free.

NS&I is also cutting the rate on its Direct Saver from 3.5 per cent to 3.3 per cent. These new lower rates also come into play from 5 March.

Andrew Westhead, NS&I retail director, said: ‘We regularly review our products to ensure they reflect current market conditions.

‘The changes we are making to Premium Bonds, Direct Saver and Income Bonds rates enable us to continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector.

‘Even with the change to the Premium Bonds prize fund rate, we are expecting more than 5.9million tax-free prizes worth over £411million to be won in the April 2025 draw.’

This £411million figure is down from the £430million in the most recent draw.

Currently, the best buy easy-access accounts pay between 4.62 and 4.5 per cent. 

However, the major attraction of Premium Bonds is receiving tax-free prizes, and the lure of winning a life-changing sum of money, while being able to withdraw money fairly easily. 

With Income Bonds, the boon is monthly interest and the large sums that are protected in there versus £85,000 per bank, per licence via the Financial Services Compensation Scheme. 

You can check out the best buy monthly income savings tables.  

NS&I bumps up easy-access Isa rate

With a battle for Isa cash in the run-up to the end of the tax year and beginning of a new one, NS&I has bumped up the rate on its Direct Isa.

This now pays 3.5 per cent. It has paid 3 per cent since August 2023. 

However, savers can still get rates of 5 per cent on easy-access Isas – and a raft of accounts pay more than 4.5 per cent.

Use our independent This is Money best buy savings tables to see the best rates.

Mr Westhead adds: ‘At a time when many savers are reviewing their Isa plans, I’m glad we have been able to increase our Direct Isa interest rate for those wanting to make the most of their tax-free savings allowance.’

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