Martin Lewis’ MoneySavingExpert.com team has recently discussed the ongoing value of Premium Bonds following a reduction in NS&I’s prize fund rate. Premium Bonds function as a savings product where instead of receiving a fixed interest rate, participants are entered into a monthly lottery draw.
The prizes range from £25 to £1 million per month, with a higher frequency of smaller prizes compared to larger ones. NS&I has announced a decrease in the Premium Bonds prize fund rate from 3.6% to 3.3% starting from the April 2026 draw.
The prize fund rate serves as the equivalent of an interest rate for Premium Bonds, and the odds of winning a prize per bond have decreased from 1 in 22,000 to 1 in 23,000. According to Martin Lewis’ MSE team, the recent rate cut makes it easier to find better returns elsewhere compared to Premium Bonds.
The team highlighted that individuals with average luck are unlikely to achieve a return of 3.6% or 3.3% even with the maximum investment of £50,000. They suggested that accounts offering interest payments are now more likely to outperform Premium Bonds for most savers, as interest provides a guaranteed return, offering more predictability than the lottery-based system of Premium Bonds.
MoneySavingExpert.com emphasized that most participants are expected to receive returns lower than the prize fund rate, reducing the chances of winning the top prize of £1 million. However, they concluded that if individuals acknowledge these factors and are comfortable with the uncertainty of returns, investing in Premium Bonds could still be a viable option.