Premium Bond Prize Fund Drops Indicating Rate Cut Expected

National Savings and Investments (NS&I) has confirmed that the monthly prize fund for the premium bond draw will reduce from 3.8% to 3.6% on 1^st August.

The odds of winning a prize remain at 1:22,000 but the number of £1,000,000 prizes remain unchanged. The cut means that there will be more £25 only winners, up c5% but £100,000 to £50 winners will fall significantly.  98% of all prizes will still be £100, £50 or £25.

Comment

No major changes for the most of us.

• 3.60% tax free is still a great return and you would need a bank account paying  4.5% pa if you are a basic rate taxpayer and 6.0% pa if you are a higher rate taxpayer.

Our view is that this is a significant indicator that Bank of England interest rates will be reduced towards the end of summer.  This may be on 7^th August 2025 or more likely on 18^th September 2025.