Premium Bonds customers are being warned their "savings are likely losing money to inflation" following recent cuts to the National Savings & Investments' (NS&I) prize fund rate.
Unlike traditional savings accounts, those who take out Premium Bonds are enrolled in a monthly prize draw, which gives them the opportunity to win cash prizes.
Last month, NS&I confirmed that the prize fund rate for Premium Bonds would be slashed from 3.80 per cent to 3.60 per cent, which will come into effect for August 2025's prize draw.
Despite this change, the financial institution claimed that the odds of customers winning a prize next month will remain at their current level of 22,000 to one.
Experts are issuing a Premium Bonds warning
GETTY / NS&I
Based on a recent NS&I report, it was cheaper to raise money through NS&I than it was for the government to sell gilts in the last financial year, which means the body may become more important for raising funds.
The amount of money NS&I has been tasked by the Government with raising is a third higher this year at £12billion.
Currently, there is around £103million in unclaimed Premium Bond prizes with around £32million having been waiting to be won for 15 years or longer.
Furthermore, the UK holds over £133billion in Premium Bonds, according to NS&I.
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Premium Bonds holders can check to see if they have won a prize via the Premium Bonds prize checker app NSISarah Coles, the head of personal finance at Hargreaves Lansdown, noted that Premium Bonds holders are likely to have won prizes but may be unaware.
However, she warned that recent developments mean that NS&I customers could be taking a long-term savings hit in lieu of making money.
Coles explained: "This is much-needed good news for bond holders, but there’s no getting away from the fact that the prize rate has been dropping, and will do so again next month.
"Already the odds of a big win are vanishingly distant, so despite the fact that the nation loves Premium Bonds – and holds more than £133billion worth of them – it’s worth revisiting whether they’re right for you.
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Savers are looking for the best ways to make their money go further GETTY"In an average month, the average bond holder will win nothing. It means your savings are likely to lose money after inflation.
"Over time it will eat into the value of your savings, and if you hold them for a considerable period, you could be shocked at the damage it can do to your spending power. Some people are happy with this trade-off, but others prefer the certainty of a strong rate in the wider savings market.
"Check what’s available from online banks and saving platforms, where you’ll usually find much better deals than from the high street giants."
NS&I will announce the next Premium Bonds prize winners on August 1, 2025.
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