Premium bond prize fund hits new low

Premium bond prize fund hits new low

A consumer rights website has slammed the returns offered by NS&I premium bonds, with interest rate cuts ‘swallowing up’ the likelihood of a decent return on savings.

Research by MoneySavingExpert.com found that the chance of beating inflation with savings in premium bonds has dropped from 75% to 1% following changes to the prize draw.

Changes include dropping one of the two £1 million jackpot prices, and introducing a new £25 prize level.

Interest rates on the fund have been cut from 1.8% to 1%, bringing the total value of prizes down this month from £59 million to £32.2 million.

Martin Lewis, MoneySavingExpert.com founder, explained: “The new £25 prize was heralded as a way to make more winners, yet the interest rate crash has swallowed that up, and savers now have less chance of winning at least £25 than they used to of winning £50.”

A new Premium Bond calculator on the site lets savers compare the likelihood of winning a prize with the interest they would be paid if they invested money in other savings products.

The calculator shows that savers investing £1,000 in a premium bond for two years only have a one in twenty chance of getting better returns than they would from a top savings account.

“While having a little flutter on the Bonds isn’t the worse thing in the world, for someone with average luck, using it as the core of your savings simply won’t deliver decent returns,” Lewis said.

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