Premium Bond holders may see their chances of winning a prize dip with one expert warning that NS&I will cut rates again. Next month NS&I is dropping the premium bond prize fund rate from four per cent to 3.8 per cent.
In its third quarter results the government-backed savings bank said it raised £8.9 billion of its £9 billion full-year target and was on track to raise £10.5 billion. NS&I it also said it wants to raise £12 billion next year but Sarah Coles, head of personal finance, Hargreaves Lansdown predicted that prize “woes” may continue even after the NS&I fundraising target increases.
She said NS&I had a massive third quarter, delivering £5.5 billion, which explains the raft of recent rate cuts. It meant the organisation had almost entirely filled its boots for the current tax year, when it had three months left to run.
“We’re yet to get the latest of these cuts – the Premium Bond prize cut set for April – when it falls from 4% to 3.8%.
“The question for many savers is whether this will be the last. On the one hand, the fundraising target will rise to £12 billion. On the other, we’re expecting savings rates to fall across the market, and the prize rate is likely to fall in step with it.”
NS&I have been approached for comment.
Coles said the rush into NS&I savings accounts and premium bonds in the third quarter shows how much pent-up demand there is.
“As wages rise ahead of inflation, more people are finding money to put away for the future. The HL Savings & Resilience Barometer shows that on average we’re saving 5.5% of income, which is a fair chunk of cash looking for a home. It means NS&I needs to be careful that Premium Bond don’t fall behind the rest of the market in the slow march towards lower rates. Sadly for bond holders, it means this is unlikely to be the last of the cuts to the prize rate.”
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