NS&I drops one Premium Bond £1m prize
Mar 20 2009 by Alun Thorne, Birmingham Post
National Savings and Investments is abandoning one of the £1million jackpot prizes that Premium Bond holders can win.
The group will retain one of the two £1million prizes, but it will use the money from the other to increase the mix of prizes it offers, including introducing a new £25 prize.
It defended the change, saying that maintaining the chances to win a tax-free prize on a regular basis was important to Premium Bond holders.
The move was announced as the Treasury-backed group said it was also reducing the Premium Bond prize fund rate from 1.8 per cent to one per cent.
It is the first reduction it has made to the rate since December 1, when the Bank of England base rate stood at three per cent.
It said the one per cent rate would be held for at least the April, May and June draws, even if the base rate fell further from its current level of 0.5 per cent.
The changes, which come into force for April’s draw, mean that the total value of prizes paid out each month will fall from £59 million to £32.2 million, although the number of prizes distributed will remain broadly unchanged at just under 1.1 million.
The odds of winning a prize will also remain unchanged at 36,000-1, meaning that someone with the maximum £30,000 invested in Premium Bonds could, with average luck, expect to win 10 prizes a year.
Peter Cornish, director of customer offer at NS&I, said: “Replacing one of the £1 million jackpot prizes with a wider mix of prizes and introducing the new £25 prize category will help us maintain the frequency of tax-free prizes – something that we know is particularly important to Premium Bond holders.”
The group, which has seen a strong in-flow of savings since the credit crunch first struck as people have been attracted by the security of its Government guarantee, also announced that it was cutting returns on its variable rate products by up to 0.5 per cent.
The group’s Direct ISA will now pay interest of 1.3 per cent, while the rate on its Cash ISA has been cut to 0.5 per cent.
Income bonds will now pay returns of between 0.7 per cent and 1 per cent, depending on how much people have invested, while rates paid on the group’s Investment Account range from 0.2 per cent to 0.3 per cent.
