The annual prize rate for Premium Bonds – a savings product where interest is decided by a monthly prize draw – is dropping from 1.35% to 1.25%. The odds of each £1 Bond number winning will lengthen to 30,000-to-one from 26,000-to-one.

Then from 6 June, rates on Direct ISAs and Income Bonds will fall from 1.25% to 1% and on Direct Saver products will be 0.8% from 1.1%

Calum Bennie, savings expert at Scottish Friendly, said: “With the Bank of England continuing to sound a dovish tone on when we can expect interest rates to rise, this decision by NS&I should come as no surprise to anyone. For years now savings rates have continued to plunge to almost derisory levels.

“The move by NS&I will only encourage more providers of cash savings accounts to follow suit. With the outlook for interest rates looking like they will remain at rock bottom, savers should continue positioning themselves to offset meagre returns on cash.

“Those looking to prepare for their financial future, should seek alternatives to help their money grow over the long-term. Stocks and shares ISAs provide are one opportunity for savers to get better returns on their cash, although risk is attached.”

‘Could I really become a millionaire by holding premium bonds?’