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Premium Bonds odds have lengthened, meaning the chance of winning has been slashed after National Savings & Investment (NS&I) failed to hit its income target.
Millions of savers will be worse off when the changes are made on May 1, as interest rates were also cut on a number of its accounts. The state-backed institution, which has a duty to balance the needs of savers, taxpayers and the wider market, will change the chance of a single Premium Bond winning a prize from 24,500/1 to 26,000/1.
The effective annual interest rate on the deals will fall from 1.4 per cent to 1.3 per cent. About 22 million people own 70 billion Premium Bonds.
NS&I will also reduce the 3.47 million Premium Bond prizes it pays out every month by 173,718.
Two people will still win the top amount of £1 million every month, but all the other prize categories, from £25 to £100,000, will have fewer winners.
And there will be an estimated 13,448 £100 prizes on offer in May, down from 27,221 in February, NS&I said.
The main function of NS&I, which has 25 million customers, is to raise money for HM Treasury as an alternative to the government making money from selling debt in the form of bonds.
Because interest levels on these bonds are currently low, few investors want to buy them. As a result, NS&I is cutting the rates it pays to savers to help the Government raise cash. Sarah Coles, of Hargreaves Lansdown, the fund shop, said the changes were "yet another blow for loyal NS&I savers".
NS&I said the changes will ensure it is positioned appropriately against its competitors. Ian Ackerley, NS&I chief executive, 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."
The firm will also trim rates on its Direct Saver easy-access account from 1 per cent to 0.7 per cent, its Income Bonds from 1.16 per cent to 0.7 per cent and its Investment Account deals from 0.8 per cent to 0.6 per cent.
New Guaranteed Growth Bonds, Income Bonds and Fixed Rate Savings Certificates will all be cut by up to 0.4 per cent depending on how long the deals last. Various bond rates are also being chopped, including Guaranteed Growth Bonds and Guaranteed Income Bonds.
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