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NS&I cuts premium bond prizes

There'll be 300,000 fewer prizes from next month

premium bonds

The odds of your premium bond being a winner are lengthening to 30,000 to one 

An estimated 300,000 fewer prizes will be handed out to premium bond holders in June.

As a result, the odds of each bond landing a prize each month have lengthened to 30,000 to one from 26,000 to one.

While there will still be two winners of the top £1m prize, the number of £100,000 winners will fall from five to two and the number of people scooping £50,000 will be cut from 12 to five. 

There will also be reductions to the number of smallest prizes available, with the number of £25 winners set to be reduced from 2.3m to 1.9m.

However, the number of both £100 and £50 prizes will increase from 18,500 to more than 64,000. 

The annual prize fund interest rate – which indicates the average payout – is currently set at 1.35%, but from June 2016 this will fall to 1.25%.

Premium bonds vs cash Isas and savings accounts

Premium bonds

Premium bonds don’t pay interest. Instead, they’re entered into a prize draw each month, giving holders an opportunity to win tax-free cash.  

The annual prize fund interest rate (which drops to 1.25% in June) determines how much money is issued as prizes every month. 

Essentially, it means someone with average luck may get an annual return of around 1.25% from June 2016.

You could win a life-changing amount of money. On the other hand, there’s a possibility you may never win a prize and your savings will be eroded by inflation. 

Cash Isas and savings accounts

Unlike premium bonds, cash Isas and savings accounts offer a guaranteed return. 

The best instant-access rate currently available in the Which? Money Compare cash Isa tables (excluding Isas with certain qualifying conditions and restrictions on withdrawals) is 1.65% AER, offered by Punjab National Bank. Click here to visit Which? Money Compare and learn more about this Isa.  

The best rate in our instant-access savings account tables is 1.5% AER offered by NatWest, although this rate drops to 0.1% AER after 12 months. Click here to visit Which? Money Compare and learn more about this account. The best non-teaser rate in our tables is 1.45% AER offered by RCI Bank.  

You could earn more interest if you deposit savings in a fixed-rate account. All interest earned in cash Isas is tax-free, and you can now earn up to £1,000 (£500 if you’re a higher-rate taxpayer) in interest in traditional savings accounts before you have to pay tax.

The Which? Money Compare savings and Isa tables let you search hundreds of savings accounts and Isas from providers large and small to find a great savings rate based on quality of service as well as cost and benefits.

Which? Money Compare table – Cash Isas and savings accounts – hundreds of deals compared

NS&I premium bond prizes

The table below details how many cash prizes were available up to June 2016 and how this is likely to change in next month’s draw. 

NS&I premium bond prizes
Prize Number of prizes up to June 2016 Number of prizes in June 2016 (estimate)
£1m 2 2
£100,000 5 2
£50,000 12 5
£25,000 22 9
£10,000 53 24
£5,000 110 46
£1,000 1,352 1,257
£500 4,056 3,771
£100 18,503 64,198
£50 18,503 64,198
£25 2,267,978 1,879,199
Total 2,310,596 2,012,711

More on this…

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