NS&I reduces interest rate on Premium Bonds
- The prize fund rate reduction reflects market trends and will ensure NS&I continues to balance the interests of its savers, taxpayers and the stability of the broader financial services sector.
NS&I today announced that it was reducing the annual Premium Bond prize fund rate by 0.20% to 1.30%1 from 1 August 2013. The odds of each £1 Bond number winning a prize will change to 26,000 to 1 from 24,000 to 1.
NS&I sets its interest rates and the Premium Bond prize fund rate to balance the interests of its savers, taxpayers and the stability of the broader financial services sector. It has taken the decision to reduce the Premium Bond prize fund rate to stay within its Net Financing range for 2013-14. NS&I announced today that in the first quarter of 2013-14 (April-June) it delivered Net Financing of £1.7 billion against a target of £0 with a range of £2 billion either side of this.
Interest rates have fallen over recent months in the savings sector, resulting in NS&I savings being increasingly competitive. The reduction in the Premium Bond prize fund rate reflects current lower interest rates across the savings market. Last month, NS&I announced it was reducing the interest rates on its Income Bonds, Direct Saver and Direct ISA with effect from 12 September 2013.
Jane Platt, Chief Executive of NS&I, said: “Rates across the savings market have fallen over recent months, resulting in NS&I savings being increasingly attractive. To ensure we stay within our Net Financing target – and in light of our framework to balance the needs of our savers, taxpayers and the stability of the broader financial services sector – we now need to reduce the Premium Bond prize fund rate.”
Premium Bonds will still pay out circa 1.7 million tax free prizes each month and have a monthly prize fund of £49 million in August 2013. Premium Bonds can be managed online, by phone and by post, and customers can now opt to have prizes paid directly into their bank account by BACS. NS&I customers can sign-up for email notification of all NS&I interest rate changes and other NS&I news here.
Instead of paying interest, Premium Bonds are entered into monthly prize draws to win prizes from £25 to £1 million. The monthly prize fund is set by calculating one month’s interest on the total value of all eligible Bonds, at the annual prize fund rate.
The effect of changes in the Premium Bond prize fund rate
|2012-13 (including Q4)||11.7||2.3|
|Value of prizes||Number of prizes in July 2013||Number of prizes in August 2013 (estimate)|
Notes to Editors
- Tax-free: this means that the prizes are exempt from UK Income Tax and Capital Gains Tax.
- Information on the Premium Bond prize fund can be found here.
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