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National Savings & Investments, the state-backed savings provider, has cancelled a planned cut to the prize rate on Premium Bonds in a bid to support savers.

The effective interest rate on the popular savings product will now remain at 1.4 per cent, meaning the odds of winning a prize in the monthly draw remain at 24,500 to one. 

In February, NS&I had announced plans to cut the prize rate by 10 basis points to 1.3 per cent, which would have lengthened the odds of winning a prize to 26,000 to one. 

Planned interest rate reductions on certain other NS&I products have also been shelved. The rate on its easy access Direct Saver account will remain at 1 per cent, and variable rate Income Bonds will offer 1.16 per cent. Both had been due to drop to 0.7 per cent. 

However, planned rate cuts on other fixed-term savings products will still go ahead as planned. Lower interest rates on NS&I Guaranteed Income Bonds, Guaranteed Savings Bonds and fixed interest savings certificates will take effect at the beginning of May.

“Premium Bonds are a national treasure, and can be a useful place to keep your emergency savings,” said Sarah Cole, personal finance analyst at Hargreaves Lansdown. “It’s easy to get hold of your cash, they offer the chance of a prize and there’s the glimmer of a hope that your sensible safety net will win you £1m.”

However, Ms Coles said that cuts to NS&I fixed-rate bonds should prompt savers to shop around for a better rate. 

“Even the most committed NS&I savers should think twice before opting for one of these bonds. You may be able to do far better elsewhere, so it’s well worth shopping around.”

Customers registered for online and phone services can use NS&I’s website to arrange for Premium Bonds prizes to be paid directly into their bank account.

National Savings & Investments products
Accounts & bonds (gross)Min deposit Max depositAER %Interest paid 
Income Bonds£500£1m1.16%Mly
Direct Saver£1£2m 1.00%Yly
Investment Account£20£1m0.80%Yly
Accounts & bonds (tax free)----
Junior ISA£1£03.25%Yly
Direct ISA£1£00.90%Yly
Source: Moneyfacts----

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