The Premium Bonds prize fund rate will fall from 4.15% to 4% from the January 2025 draw, although the odds of winning will remain at 22,000 to 1.

National Savings & Investments said it was cutting rates in response to changes in the savings market.  

Andrew Westhead, NS&I retail director, said: "We carefully review our savings rates in response to changes in the broader market. These adjustments help us meet our net financing target while balancing the interests of our savers, taxpayers and the wider financial services sector.”

He said the January 2025 Premium Bonds draw will deliver more than 5.8 million tax-free prizes worth more than £431m, ranging from two £1 million prizes to over 1.8 million £25 prizes.

Laura Suter, director of personal finance at AJ Bell, said: “NS&I has joined the troops of other savings providers cutting interest rates, as the savings market cools after a bonanza couple of years. Savers with money in Premium Bonds should really think about whether the account is right for them. Considering many Premium Bond holders will never will a prize."

A previous Freedom of Information request obtained by AJ Bell revealed that two-thirds of Premium Bond holders, equivalent to just under 14.4 million people, have never won a prize.

The average holding for the 5.3 million Premium Bond holders who won a prize between June 2023 and May 2024 sat at £23,047, with 80% of those who won winning more than once during that period.

Over the 12 months to May 2024 the average holding of someone not winning was £175, showing that those with very small balances are unlikely to win.

Value of Premium Bonds prizes

Rates for NS&I’s Direct Saver and Income Bonds will be cut by 0.25 percentage points from 20 December.

The interest rate for Direct Saver will drop from 3.75% to 3.50% gross/AER, and Income Bonds from 3.69% gross/3.75% AER 3.44% gross/3.49% AER.