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Millions of people's dreams of scooping the premium bond jackpot were dealt a blow today when National Savings & Investments announced it was scrapping one of the two monthly £1m top prizes and introducing a new £25 prize category.
The Treasury-backed NS&I blamed the shake-up in payouts on falling interest rates. Under the changes bondholders' chances of winning a prize stay the same, but they will be less likely to win a sizeable sum.
NS&I said that from the April prize draw onwards, one of the two monthly premium bond jackpot prizes of £1m would be replaced by "a wider mix of prizes", and a new £25 prize would be brought in. Until now, the smallest amount you could win was £50.
The £1m premium bond jackpot was introduced in 1994, and National Savings moved to two £1m prizes a month in August 2005. At the time, the government said by offering two jackpots a month, "NS&I is making premium bonds more attractive and thereby helping to encourage the savings habit in Britain".
NS&I also announced it was slashing the premium bond "prize fund rate" – the proportion of the total amount invested paid out in prizes – from 1.8% to 1% a year. It said this rate would be held for at least the April, May and June 2009 draws, even if there were further changes to the Bank of England base rate.
However, the odds of winning a prize with each £1 bond number will remain unchanged at 36,000 to 1. This means someone with the maximum £30,000 invested can, "with average luck", expect to win 10 prizes a year.
The total value of prizes next month is estimated at £32m – down from £59m this month and £87m in November.
"Replacing one of the £1m 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," a spokesman said.
However, changes to the prizes available may have little impact on the influx of cash into National Savings' coffers, as nervous Brits look to benefit from the 100% guarantee on their investments.
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