Millions of savers are to be hit by a series of interest rate reductions announced by the Treasury-backed savings giant NS&I.

The institution, which has 25 million customers and a duty to balance the needs of savers, taxpayers and the wider market, said the changes would take effect from May. They include making the premium bonds prize fund rate less generous.

“This is another kick in the teeth for savers,” said Baroness Altmann, the former pensions minister.

The Times quoted her as saying: “Many people, especially older generations, have used NS&I all their lives and know it is safe, so they want to keep their money in those accounts … It seems the government is sanctioning rate cuts in NS&I that will allow banks to continue to offer very poor rates without driving more savers away.”

The odds of any £1 bond number winning any prize will decrease from 24,500/1 to 26,000/1 from the May 2020 draw onwards. Around 173,718 fewer premium bond prizes will be handed out in May, compared with February.

It means, for example, that there will be five £100,000 prizes up for grabs in the May draw, down from six in February. And there will be around 13,448 £100 prizes on offer in May, down from 27,221 in February, NS&I said.

Meanwhile, from 1 May, the rate on NS&I’s direct saver will be slashed from 1% to 0.7% and the investment account rate will tumble from 0.8% to 0.6%.

Various bond rates are also being chopped, including guaranteed growth bonds and guaranteed income bonds.

NS&I said customers holding guaranteed growth bonds, guaranteed income bonds and fixed interest savings certificates, and whose investments mature on or before 1 June 2020 and who automatically renew into a new issue of the same term, will receive the previous, higher interest rate.

But customers renewing into a new issue but a term of a different length will receive the reduced interest rate effective from 1 May.

NS&I said the changes will ensure it is positioned appropriately against its competitors and help maintain the stability of the broader financial services sector. NS&I 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% HM Treasury guarantee on all their holdings with NS&I.”