Premium Bonds savers told to ‘brace’ for prize fund fall as NS&I accounts set to become ‘less attractive’

NS&I saver looks at statement

NS&I savings accounts could become "less attractive" soon, a personal finance expert has warned

Jessica Sheldon

By Jessica Sheldon

Published: 23/11/2023

- 11:07

Updated: 23/11/2023

- 15:22

NS&I has drawn in £9.8billion from savers in the past six months

NS&I savers are being warned interest rate cuts could be just around the corner as new figures show the Government-backed savings provider has already exceeded its fundraising target for the 2023/24 tax year.

Laura Suter, head of personal finance at AJ Bell, said: “Savers should brace themselves for rate cuts on NS&I accounts and for the Premium Bonds prize fund to fall – as the Government-backed provider has already exceeded its fundraising target for the tax year.

“The success of NS&I’s one-year guaranteed bonds this summer saw huge numbers of savers put their money in the accounts and means that the provider leapt past its £7.5billion annual fundraising target in just six months.”

NS&I delivered £7.7billion of Net Financing in the second quarter of 2023/24, giving a half-year total of £9.8billion, according to its latest unaudited quarterly results.

NS&I Premium Bonds prize checker app on phone

NS&I could reduce the Premium Bonds prize fund rate, the expert has warned


Ms Suter explained that in the “small print” of yesterday’s Autumn Statement, it was confirmed NS&I’s Net Financing target for this tax year was not changed – remaining at £7.5billion (+/- £3billion).

She said: “It gives the provider generous wiggle-room of £3billion either side of that target, meaning it can only raise another £700million in the next six months before it breaches its extended target.

“All this technical detail has a direct impact on savers, who will see NS&I accounts become less attractive in the coming months.

“The Government-backed provider raises rates to draw more savers in – if it doesn’t need to attract any more money it will cut those rates.”

However, the personal finance expert said sudden, substantial interest rate cuts were not likely.

She explained: “NS&I has to play a delicate balancing act to avoid mass withdrawals that counteract the inflows it’s already seen this year – so a slow and steady approach to cuts is more likely than a giant axe to rates.

“We’ve already seen NS&I pull its guaranteed bonds and cut the rate on its Green Savings Bond, but it’s highly likely that other accounts will be up for the chop too.

“Over the past two years NS&I has hiked the effective prize fund on Premium Bonds – taking it to a 23-year high in August – and often making it the market-leading account.

"But as other providers take the axe to savings rates, NS&I will follow suit.”

Money in pictures

Savers are being urged to "nab the best interest rates" before options fall further


Ms Suter suggested savers compare savings options on the market to ensure they get the highest-paying interest rates.

She said: “This is another sign for savers to shop around and nab the best rates before they fall further.

"Moneyfacts data shows that the interest rates on fixed rate bonds are falling already, giving further fuel to the idea that savers may have already seen the best that savings rates have to offer.”

An NS&I spokesperson said: “In a dynamic savings market, we have supported savers with successive interest rate increases across many of our variable and fixed-term products.

“Inflows and outflows vary throughout the year depending on customer priorities and the products on offer, so net financing can differ from quarter to quarter.

“We currently expect to end the year within the net financing target range of £4.5billion to £10.5billion.

“We review the interest rates on all of our products regularly to ensure that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”

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