National Savings & Investments has today wielded the axe on Britain's best-loved savings product, halving the winners of £50 and £100 prizes from May.

In February 27,221 savers won £100 in the Premium Bonds draw, while another 27,221 won £50. However, NS&I estimated that in May there will be just 13,448 of the £50 prizes and the same number of £100 prizes, a drop of just over 50 per cent.

All other prize levels will also face cuts, with only the two £1million jackpots immune to the cuts that take the effective average interest rate down from 1.4 per cent to 1.3 per cent.

Overall, there will be an estimated 173,718 fewer prizes in May's draw than this month's.

Fewer Premium Bond prizes will be up for grabs in May after National Savings & Investments today announced it was wielding the axe

As well as the drastic cuts to the winners of £50 and £100 prizes, there will be one fewer winner of the second-largest £100,000 prize, one less winner of £50,000, two fewer winners of £25,000 and five fewer winners of £10,000.

The cuts reduce the effective prize fund rate of Premium Bonds, which do not pay interest, to 1.3 per cent a year, and the odds of any one bond winning a prize from 24,500 to 1 to 26,000 to 1.

The interest rate is equivalent to the average winner's prizes over a year, whereas individual Premium Bond holders may find themselves more or less lucky than that.

NS&I returns have been dented by falling savings rates in the wider market and declining UK government borrowing costs, both of which it must take into account when setting its returns.

How fewer Premium Bondholders will win prizes from May Value of prizes Number of prizes in February 2020 Number of estimated prizes in May 2020 £1,000,000 2 2 £100,000 6 5 £50,000 12 11 £25,000 23 21 £10,000 59 54 £5,000 119 106 £1,000 1,984 1,857 £500 5,952 5,571 £100 27,221 13,448 £50 27,221 13,448 £25 3,408,513 3,262,871 Total: 3,471,112 3,297,394 Source: NS&I

The news is likely to dismay the almost 21million holders of NS&I's Premium Bonds, who collectively hold £81billion and often turn to the savings products in the hope that a prizewinning sum can make up for poor savings rates.

NS&I, which is a state-owned savings provider and one of Britain's largest savings providers, also announced cuts to a number of easy-access and fixed-rate savings products.

These include its direct saver, income bonds, guaranteed growth and guaranteed income bonds, and its fixed-interest savings certificates.

The scale of the cuts range from 0.15 percentage points to 0.45 percentage points, and follow NS&I's decision last September to pull its guaranteed bonds from sale and slash the rates for existing customers.

Premium Bonds Winners Prize Area Value of bond £1,000,000 Wales £5,000 £1,000,000 South Scotland £5,000 £100,000 Wales £500 £100,000 Kent £50,000 £100,000 Kent £40,000 £100,000 Wandsworth £10,000 £100,000 Gloucestershire £50 £100,000 Hereford and Worcester £10,000 More September 2020 winners View list of September 2020 winners

NS&I said the changes were due to exceptionally low rates on government bonds, which it uses to track how much money it needs to raise.

Its 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.'

Other NS&I savings deals facing cuts Account Current rate Rate from 1 May Direct saver 1% 0.7% Investment account 0.8% 0.6% Income bonds 1.15% 0.7% Guaranteed growth bonds (1 year) 1.25% 1.1% Guaranteed growth bonds (2 year) 1.45% 1.2% Guaranteed growth bonds (3 year) 1.7% 1.3% Guaranteed growth bonds (5 year) 2% 1.65% Guaranteed income bonds (1 year) 1.2% 1.05% Guaranteed income bonds (2 year) 1.4% 1.15% Guaranteed income bonds (3 year) 1.65% 1.25% Guaranteed income bonds (5 year) 1.95% 1.6% Fixed interest savings certificates (2 year) 1.3% 1.15% Fixed interest savings certificates (5 year) 1.9% 1.6% Source: NS&I

Writing in This is Money's sister title Money Mail last September when the NS&I cuts were announced, Anna Bowes, the co-founder of website Savings Champion, said: 'All in all, it's been a tough year for savers with National Savings & Investments, as the Treasury has looked for ways to reduce inflows.

'These changes will no doubt have tainted NS&I's National Treasure reputation — but it’s unlikely that it will mean people will turn their backs completely, particularly in times of financial uncertainty such as we are facing today.

'What savers can take comfort from is that these restrictions could actually encourage them to earn more money on their cash, as there are other banks and building societies that are paying far better rates of interest — and as long as the amounts held with each are kept within the FSCS limits, the cash is safe too.'



