The rate has been at 4.65% since September.

The rate is still higher than the 4% seen in August 2023, and far higher than during the height of the Coronavirus pandemic when it was just 1%.

The odds of any £1 bond number winning a prize will remain at 21,000 to 1.

Andrew Westhead, retail director at NS&I, said: “These changes reflect our requirement to strike a balance between the interests of our savers, taxpayers and the stability of the broader financial services sector. In a dynamic savings market, it’s important that our rates are set at an appropriate position against those of our competitors as we work towards meeting our annual net financing target.

“After these changes, the Premium Bonds draw in March is expected to pay out over 5.7 million tax-free prizes totalling more than £444 million to savers across the UK.”

Sarah Coles, head of personal finance, said NS&I may cut rates further.

She said: “Premium Bonds are its biggest product, so it’s likely to hope that by tinkering with the prize fund, it will avoid spending too much money on attracting more cash than it really wants. The risk is that if the money keeps coming, NS&I may well cut the rate again.

“It said in its announcement that it was making the change to allow room for its competitors. This no doubt owes something to the reaction of the banks in the autumn, when the Treasury-backed organisation offered by far the best rate on the market – making it very hard for the banks to compete. However, given that the easy access savings market hasn’t moved anywhere near as much as the fixed rate markets during the past few weeks, this may only be part of the picture.”

According to Hargreaves Lansdown, savers can achieve 5.2% on easy access savings elsewhere.

Premium Bonds were launched in 1956. Instead of earning interest, each £1 bond is entered into a monthly prize draw with the chance to win tax-free prizes ranging from £25 to two £1 million jackpots.