Premium bonds: odds of a win to get worse from April

There was some bad news this week for Britain’s 22 million-strong army of premium bond holders: the odds of winning a prize are to get worse.National Savings and Investments (NS&I) says it is cutting the proportion of the total invested amount paid out in prizes from 3.6% to 3.3% a year with effect from April’s draw.As a result the odds of winning with each £1 bond number will lengthen – from 22,000-1 to 23,000-1.When you buy premium bonds, you are entered into a monthly prize draw in which you can win between £25 and £1m tax-free.But while you could strike it lucky and scoop a life-changing sum, there is no guarantee you will win anything at all.NS&I says the April draw is expected to have close to six million tax-free prizes worth about £375m. But it has trimmed the number of higher-value prizes and increased the number of £25 ones.For example, the number of £100,000 prizes will fall from 78 this month to an estimated 71 in April, while the number of £25,000 payouts is to be cut from 311 to 284. The number of £25 prizes is to rise from about 2.6m to just over 2.8m.Alastair Douglas at the consumer credit website TotallyMoney says one of the advantages of premium bonds is that they are tax-free, which is a bonus for higher-rate taxpayers.“For example, if you held the maximum amount of £50,000 and won the equivalent of 3.3%, that’s £1,650 tax-free. A higher-rate taxpayer earning the same in savings could face a bill of £743,” he adds.One big downside of premium bonds is that they do not pay any interest and so are more vulnerable to inflation than other savings.Douglas says those who want a guaranteed return should shop around for a decent bank or building society savings account. “Some are offering more than 4% with easy access,” he adds.Check out the Moneyfacts savings best-buy tables for the latest information.