Premium Bonds just lost some of their shine, as NS&I slashes rates on four of its key products
Lady Luck was not on the side of Premium Bond holders this morning, after National Savings & Investments (NS&I) revealed it was slashing rates on four of its products.
Along with cutting the prize fund rate for Premium Bonds, NS&I will be lowering the interest rate on its Direct Isa, Direct Saver and Income Bonds offerings from the beginning of May.
The move was sparked by the relatively recent change in the Bank of England base rate, which was cut from 0.5 per cent to a historic low of 0.25 per cent last August.
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"We have taken the time to absorb the impact of the Bank of England base rate reduction and subsequent changes across the savings market," explained Steve Owen, acting chief executive of NS&I. "The new rates reflect current market conditions and allow us to continue to strike a balance between the needs of our savers, taxpayers and the stability of the broader financial services sector.
"We appreciate that savers will be disappointed, but we believe that the new rates present a fair offer to customers, who will continue to benefit from our 100 per cent HM Treasury guarantee on all holdings, as well as tax-free prizes for Premium Bonds."
Consumer champions were up in arms last March, when NS&I cut the odds of winning on Premium Bonds from 26,000 to one to 30,000 to one.
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However, all is not lost for savers, as NS&I will this Spring be launching Investment Guaranteed Growth Bonds, a three-year savings bond with an indicative interest rate of 2.2 per cent on up to £3,000, which was trailed by the chancellor in last year's Autumn Statement.
Here's a guide to the changes NS&I announced today, which will be effective from 1 May:
| Product | Current rate | New rate |
| Direct ISA | 1.00% tax-free/AER | 0.75% tax-free/AER |
| Direct Saver | 0.80% gross/AER | 0.70% gross/AER |
| Income Bonds | 1.00% gross/AER | 0.75% gross/AER |
And for Premium Bonds:
| Current prize fund rate | Current odds | New prize fund rate (from 1 May) | Odds (from 1 May) |
| 1.25% tax-free | 30,000 to 1 | 1.15% tax-free | 30,000 to 1 |