Premium Bonds are a savings product where you’re entered into a monthly prize draw, instead of getting a guaranteed rate of interest on your money
Martin Lewis’ MoneySavingExpert.com team has explained if Premium Bonds are still worth it after NS&I confirmed it is reducing its prize fund rate again.
Premium Bonds are a savings product where you’re entered into a monthly prize draw, instead of getting a guaranteed rate of interest on your money.
The prize fund rate is the closest thing Premium Bonds has to an interest rate, and this is being reduced from 3.80% to 3.60% from its August 2025 draw. It means there will be less high value prizes up for grabs.
There is expected to be over 6,011,195 prizes with a value of £396,738,700 in the August 2025 draw, versus 5,974,465 prizes with a value of £416,221,075 in the June 2025 draw.
The odds of winning a prize from the August 2025 draw will remain at 22,000 to 1, and there will still be two £1million prizes available.
In a new article published on MoneySavingExpert.com, the MSE team explained how the prize fund cut means for every £100 invested in Premium Bonds, £3.60 from August is paid out every year in prizes.
However, this isn’t actually possible in reality, as the smallest prize you can win is £25. There is also no guarantee you’ll win anything at all some months.
The MSE team concluded that the rate cut makes Premium Bonds “even easier to beat elsewhere” if you put your money into the top savings accounts.
MSE said: “This is because savings interest is a guaranteed return – so if you get today’s top easy-access rate of 4.75% (or 4.92% if you’ve not yet used up your ISA allowance), you’d get £47.50 (or £49.20) in interest a year for every £1,000 saved.
“Though this interest rate can go up and down over time, you know exactly what you’ll earn at any given point – so it still provides more certainty than Premium Bonds, where many saving the same £1,000 would win nothing.”
Andrew Westhead, NS&I Retail Director, said: “This adjustment to the Premium Bonds prize fund rate – the first in four months – reflects the changing landscape for savings.
“Premium Bonds maintain their unique appeal by offering complete security backed by HM Treasury, the flexibility to withdraw easily, and the excitement of potentially winning a tax-free prize each month.
“The August draw is expected to deliver more than 6 million tax-free prizes worth over £396 million. By making this adjustment now, we’re able to continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector.”