Premium Bonds provider NS&I has announced it will slash the prize fund rate for the monthly prize draw from 4.4 percent to 4.15 percent.
The change will come into effect from the December draw, with the odds of each £1 winning also decreasing from 21,000 to one, to 22,000 to one.
Each eligible £1 Bond goes into the monthly prize draw with winning Bonds chosen at random so each Bond has an equal chance of being paired with a prize.
Andrew Westhead, NS&I Retail Director, said: “As the savings market continues to change, we need to lower the rates on some of our products to help us meet our Net Financing target, while also ensuring we continue to balance the interests of our savers, taxpayers and the broader financial services sector.
“Even with the changes, we’re still expecting to pay out over 5.7 million prizes worth over £435million in the December Premium Bonds draw.”
Commenting on the news, Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The Premium Bond prize rate has finally been hit with the business end of the savings rate scythe, as NS&I has followed the rest of the easy access savings market by cutting the chances of a win.
“This was always going to happen eventually. NS&I has a duty not to overpay for the money it raises for the Treasury, which means the prize rate needs to be middle of the pack within the easy access savings market.”
Ms Coles also cautioned that the average saver with £1,000 in Bonds will “still win nothing” on average.
Prizes range from £25 up to a jackpot prize for £1million, but you can go months or even years without winning anything.
The finance expert said: “The lengthening of the odds of a win should be food for thought for anyone who is holding money in these accounts and losing money after inflation.
“This could be the straw that breaks the camel’s back, and could be enough to persuade you to consider savings accounts instead.”
NS&I is also cutting the rate on its Direct Saver and Income Bonds from November 20, with the rate dropping from 4 percent to 3.75 percent.
Ms Coles urged savers to look around for better rates as there other savings accounts with rates of 5 percent or higher.
NS&I is also cutting the rate on its British Savings Bonds, with the Guaranteed Growth Bonds now at 4.1 percent, down from 4.25 percent. The rate on the Guaranteed Income Bonds has dropped to 4.02 percent down from 4.17 percent.
Ms Coles warned: “They’ve only been on sale since August, and at this rate their days may be numbered. You can do far better elsewhere, with the best on the market offering 4.6 percent.
“And while the Treasury guarantee of your savings and the attraction of the brand will go a long way, for plenty of people it’s not going to make up enough ground. These bonds look unlikely to shake or stir anyone.”