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More than 21 million Premium Bond savers will see their odds of winning diminish after National Savings & Investments announced cuts to its popular savings scheme.
The odds of winning on Premium Bonds will fall to 34,500 to 1 from 24,500 to 1, from December. The prize fund will also be reduced, meaning that the effective prize rate drops from 1.4pc to 1pc. The changes will see the number of £100,000 prizes offered in each draw fall from seven to four.
This means struggling savers will be hit with the longest odds and poorest returns since April 2009. NS&I said about 21 million customers have Premium Bonds worth a total of £89bn.
The organisation has also announced swingeing cuts to its popular savings accounts after being flooded with applications. Customers who opened a best-buy savings account with NS&I will see their returns cut by more than 99pc from November.
NS&I’s Income Bonds will fall from a market-leading 1.16pc to 0.01pc on November 24, a cut of more than 99pc. Some 186,000 customers have £22bn deposited in Income Bonds.
At the same time its Direct Saver will be lowered from 1pc to 0.15pc and its Investment Account from 0.8pc to 0.01pc.
Isa savers will also suffer substantial rate cuts. Direct Isa customers will see their returns fall from 0.9pc to 0.1pc and Junior Isa savers will fall from 3.25pc to 1.5pc in November.
NS&I had been a ray of light for savers during the coronavirus crisis, after the Government-backed organisation was ordered to raise £35bn to help fund the fight against Covid-19.
NS&I customer deposits increased by £14.5bn between April and June and a similar sum is expected to be saved between July and September. This means that the organisation has already met the its target.
NS&I said the changes would ensure its interest rates are “aligned appropriately against those of competitors”.
Anna Bowes of Savings Champion, a comparison service, urged savers to move their cash elsewhere. "NS&I has just put up a big closed sign. Hopefully the savers who have been piling in will not accept this behaviour and move their money.
"The fear is this could have an impact on the recent uptick in competition among easy-access savings accounts."
Ian Ackerley, of NS&I, said that cutting interest rates was a “difficult decision”.
“Given successive reductions in the Bank of England base rate in March, and subsequent reductions in interest rates by other providers, several of our products have become ‘best buy’ and we have experienced extremely high demand,” he said.
Mr Ackerley said that a rate cut scheduled for May had been cancelled because the organisation wanted to support customers through the coronavirus crisis and now was the time “to return to a more normal competitive position”.
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