National Savings & Investments has cut the premium bond prize fund by nearly £8m in its latest bid to meet Government financing targets.
From 1 August, the prem-ium bond prize fund will fall to £49m compared with £57m in July while the odds of each £1 bond winning will fall from 24,000 to one to 26,000 to one and the number of prizes will also drop from 1.9 million in July to 1.75 million.
The latest cut follows rate reductions on NS&I Income Bonds from 1.75 per cent to 1.25 per cent, Direct Saver from 1.5 per cent to 1.1 per cent and Direct Isa from 2.25 per cent to 1.75 per cent from 12 September.
NS&I has struggled to find a cost-effective way of raising Government finance as gilt yields have plunged to historic lows. For 2012/13, it cost the Government £249m. For 2013/14, NS&I has a zero net financing target and is targeted to cost the Government £320m compared to if it solely used the wholesale markets.
Hargreaves Lansdown pensions analyst Laith Khalaf says: “If you look at the mathematics of premium bonds there are better rates on the market now but you still might get lucky.”