More Premium Bond cuts on the horizon, says finance expert

Savings giant NS&I recorded a bumper net inflow of £5.5 billion between October and December 2024, leading one finance expert to suggest that more Premium Bond cuts could be in the pipeline.

The Treasury-backed provider is set a net financing target, which for the current financial year (2024/25) is £9 billion, with a margin of plus or minus £4 billion.

The total it has raised so far across the first three-quarters of this year is £8.9 billion.

NS&I has a duty to balance the interests of savers with those of taxpayers and broader market stability.

Wednesday’s spring statement confirms that NS&I is now expected to raise a total of £10.5 billion in 2024/25 – a total which is in line with its target.

NS&I’s overall net financing performance for 2024/25 will be announced as part of its annual results later in 2025.

NS&I said that, against a backdrop of recent Bank of England base rate reductions and changes made by the wider market, it has responded with a series of interest rate reductions to its variable and fixed-term products.

In February, it announced that fewer big money Premium Bonds prizes will be available from the April draw, when the prize fund rate is slashed from 4% to 3.8%.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “Premium Bond woes may continue even after the NS&I fundraising target increases.

“NS&I had a massive third quarter, delivering £5.5 billion, which explains the raft of recent rate cuts. It meant the organisation had almost entirely filled its boots for the current tax year, when it had three months left to run.

“On the one hand, the fundraising target will rise to £12 billion. On the other, we’re expecting savings rates to fall across the market, and the prize rate is likely to fall in step with it.

“The rush into NS&I in the third quarter shows how much pent-up demand there is.”

Ms Coles added: “Sadly for bond holders, it means this is unlikely to be the last of the cuts to the prize rate.”