Premium Bond changes could be on the way in wake of Chancellor Rachel Reeves’ autumn Budget
Following the fallout of the Budget, it seems the Chancellor isn’t done with savers yet
The premium bonds system is a popular way for Brits to save(Image: inyourArea)
As the dust settles from the Government’s Budget earlier this week, economists are analysing the implications and noticing a trend. One particular group of financially active Britons appears to be in the Chancellor’s sights more than others.
The Chancellor announced that the cash ISA allowance for people under 65 will be reduced to £12,000 starting in 2027, with the aim of encouraging savers to instead invest in stocks and shares.
One popular savings method is investing in Premium Bonds, which allows individuals to deposit up to £50,000 with National Savings and Investments (NS&I). Instead of earning interest, investors have the chance to win tax-free prizes of up to £1 million. While we cover these draws each month, changes may soon be on the horizon for this traditional savings option.
The Chancellor stated that NS&I, which manages Premium Bonds and other savings products, will be expected to raise between £13 billion and £17 billion from savers this year, surpassing the previous target of £12 billion. NS&I uses Premium Bonds and products like British Savings Bonds to generate funds for the Government. Experts suggest that savings rates on these products are likely to increase in order to attract more savers.
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Dax Harkins, chief executive of NS&I, said: “Our net financing target for 2025-26 was set at £12bn – £3bn higher than the previous year – and we are pleased to be able to support a further increase of £1bn, taking the target to £13bn. Our pricing is designed to meet this revised target and maintain market stability, and we expect our performance to continue steadily through the second half of the financial year.”
Earlier this month, rates for several accounts were increased by up to 0.31 percentage points, with the most significant rise occurring for five-year bonds. The rates on NS&I’s one-year guaranteed growth and income bonds also increased from 4.04% to 4.2%.
While Premium Bonds offer tax-free prizes, they do not provide a guaranteed return. Instead, savers are entered into a monthly lottery, where prizes can range from £25 to £1 million. The current effective interest rate for Premium Bonds is 3.6%.
Before the Budget announcement, Reeves was advised by leading economists to eliminate the £50,000 limit on Premium Bonds to encourage more savers to participate. However, the Chancellor did not implement this change on Wednesday.
An NS&I spokesman said: “We review the interest rates on all of our products regularly to ensure that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”
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