The Cosmic Watchdog

NS&I said it was cutting the Premium Bond prize rate from 4% to 3.80% from April – but the odds of winning stay at 22,000 to 1.

The drop is the second this year as in January NS&I cut the win rate from 4.15% to 4%.

Premium Bonds do not pay monthly interest. Instead anyone holding them is entered into a monthly draw where they have the chance to win prizes of between £25 to £1 million and the prize rate is the average amount someone might expect to win.

Although that average takes into account two main winners a month who scoop the maximum £1 million jackpot.

Sarah Coles, head of personal finance at Hargreaves Lansdown, said NS&I is testing the loyalty of its Premium Bond holders by slashing the prize rate to 3.8%.

She said: “It was bound to happen, because the easy access savings market has been inching south ever since this month’s Bank of England rate cut, and NS&I will be keen not to pay more than it has to.

“It’s also slashing the rate on two of its easy access savings products. Cash ISAs have dodged the scythe though, and the rate has actually risen.”

Coles said millions of people are prepared to hang on through thick and thin, for the chance of winning a prize – and the vanishingly small chance of winning a life-changing sum of cash.

She said: “The cuts have focused on the bigger prizes, in order to keep the chances of a win the same. However, even then, the average bond holder will win nothing in the average month.

“It means your savings are likely to lose money after inflation, and with every sign that inflation is on the rise, you’ll be paying an even bigger price.

“Whenever the rate is cut it’s worth considering whether you’re still happy with the deal, or whether you’d prefer the certainty of a strong rate in the wider savings market. It’s worth checking what’s available from online banks and saving platforms, where you’ll usually find the strongest deals.”

Coles added that savers might be better looking at the NS&I cash ISA which is paying 3.5% interest.

She said: “While it’s hardly jostling for position at the top of the table, the fact it has boosted this rate at a time when it’s cutting others demonstrates the real strength in the ISA market right now. The rates on the most competitive easy access ISAs are now higher than their savings account equivalents, with a number offering more than 5%.”