The reduction of 0.2% means the odds of each £1 Bond number winning a prize have lengthened from 24,000-to-one to 26,000-to-one.

NS&I said the decision to reduce the rate has also been taken to ensure it stays within its Net Financing range for 2013-14.

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.

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.”