Martin Lewis’ MoneySavingExpert.com team recently discussed the viability of Premium Bonds following NS&I’s announcement of a reduction in its prize fund rate. Premium Bonds function as a savings product where instead of receiving a fixed interest rate, participants are entered into a monthly lottery draw.
Prizes for Premium Bonds range from £25 to £1 million, but winning every month is not guaranteed, with more smaller prizes distributed compared to larger sums. While thousands of £25 prizes are typically awarded, only two £1 million prizes are given out. NS&I confirmed a reduction in the Premium Bonds prize fund rate from 3.6% to 3.3% starting from the April 2026 draw.
The prize fund rate serves as Premium Bonds’ equivalent of an interest rate, with the odds of winning a prize with a single bond dropping from 1 in 22,000 to 1 in 23,000. The latest rate cut has made it easier to find better returns elsewhere than with Premium Bonds, according to Martin Lewis’ MSE team. They noted that for the majority of individuals with average luck, accounts offering interest are now more likely to outperform Premium Bonds.
Interest-bearing accounts provide a guaranteed return, offering more certainty than Premium Bonds where many may not win anything. Despite fluctuations in interest rates, savers know exactly what they will earn at any given time. MSE emphasized that most individuals are likely to receive lower returns than the prize fund rate and have a slim chance of winning the top £1 million prize. However, for those who understand and accept these probabilities, investing in Premium Bonds may still be a viable option.