NS&I has also reduced the interest rates for the Direct Saver and Income Bonds, with effect from 5 March 2025.
The Direct Saver – NS&I’s easy-access savings account – rate will be cut from 3.5% to 3.3%. The rate on Income Bonds will fall from 3.49% to 3.3% AER.
Andrew Westhead, NS&I’s retail director, said: “We regularly review our products to ensure they reflect current market conditions. The changes we are making to Premium Bonds, Direct Saver and Income Bonds rates enable us to continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector.
“Even with the change to the Premium Bonds prize fund rate, we are expecting more than 5.9 million tax-free prizes worth over £411m to be won in the April 2025 draw.”
The April 2025 Premium Bonds draw is expected to have more than £411m in the prize fund with more than 5.9 million prizes, ranging from two £1m prizes to over 2.1 million £25 prizes.
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Laura Suter, director of personal finance at AJ Bell, said: “NS&I has cut the rate on Premium Bonds once again, slashing the expected prize fund rate from 4% down to 3.8%. The odds of winning have remained the same, but instead, the number of prizes at some levels have been cut. This has slashed the total prize fund each month from £430m down to just over £411m.
“Savers with money in Premium Bonds should take a step back and consider whether they’re really getting the best deal. While the prize draw element is appealing, the reality is that many Premium Bond holders will never win a prize, and the average return is far lower than what’s available in the top easy-access savings accounts. For those who want certainty on their returns, a traditional savings account could be a smarter choice.”
Cash ISA rate to go up
NS&I has increased the interest rate for its Direct ISA from 3% to 3.5% with immediate effect. The state-backed savings institution said it wanted to help savers who are reviewing their ISA plans as the new tax year approaches.
The Direct ISA is a cash ISA for customers aged 18 or over who are resident in the UK for tax purposes. Customers who have an NS&I Direct Saver can apply online for a Direct ISA and pay for it from their Direct Saver. Money can be taken out of the Direct ISA online or by phone, with no notice or penalty.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “NS&I is throwing its weight behind its cash ISA, boosting the easy-access rate to 3.5% to make the most of what’s likely to be a busy cash ISA season. And while it’s hardly jostling for position at the top of the table, the fact it has boosted this rate at a time when it’s cutting others demonstrates the real strength in the ISA market right now. The rates on the most competitive easy-access ISAs are now higher than their savings account equivalents, with a number offering more than 5%.”
