From May, interest rates on premium bonds and savings accounts from Treasury-backed savings organisation NS&I will be reduced.
The NS&I, which has 25 million customers, has a responsibility to balance the needs of savers, taxpayers and the wider market and has decided to cut the rates that it pays.
As a result of these changes, the rate on NS&I’s direct saver product will be slashed from 1 per cent to 0.7 per cent and the investment account rate will tumble from 0.8 per cent to 0.6 per cent.
The odds of any £1 bond number winning any prize will also decrease from 24,500/1 to 26,000/1 and around 173,718 fewer premium bond prizes will be handed out.
This means that there will be five £100,000 prizes up for grabs in May’s draw, down from six in February and there will only be around 13,448 £100 prizes on offer in May, down from 27,221.
Other bond rates are also being cut, including guaranteed growth bonds and guaranteed income bonds.
However, NS&I has confirmed that customers holding guaranteed growth bonds, guaranteed income bonds and fixed interest savings certificates, and whose investments mature on or before 1 June 2020 and who automatically renew into a new issue of the same term, will receive the previous, higher interest rate.
NS&I chief executive Ian Ackerley said: “Reducing interest rates is always a difficult decision. We need to ensure our interest rates are set at an appropriate position against those of our competitors. These changes reflect NS&I’s requirement to strike a balance between the needs of our savers with taxpayers and the stability of the broader financial services sector.
“We believe our new rates offer our customers a fair return and the assurance of the 100 per cent HM Treasury guarantee on all their holdings with NS&I.”