Buried in the Spring Statement - sign that Premium Bond prize rate could soon rise: SYLVIA MORRIS

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Hidden away in last week’s Spring Statement was a line that should warm the hearts of Premium Bond holders.

I have read between the lines and infer that the prize rate could be set to rise again – or at least not be cut again for a while.

The Spring Statement documents revealed National Savings & Investments (NS&I) has been tasked with bringing in more money for the Government this financial year, which started yesterday, compared to last.

NS&I needs to attract an extra £12 billion from us between now and next April – a substantial rise from the £9 billion last year – with a £4 billion leeway each side.

It will need to tempt savers to deposit their money in its savings accounts or Premium Bonds to hit its target – and the simplest way to do that is to keep rates competitive compared with its rivals. 

Premium Bonds are the Treasury-backed savings provider’s most popular product, accounting for more than half (55 per cent) of the £240 billion we hold with it. So the easiest way to tweak inflows or outflows is to change the Premium Bond rate.

Prize boost? NS&I needs to tempt savers to deposit money in its savings accounts or Premium Bonds to hit its target of attracting an extra £12bn between now and next April

Check the best cash Isa rates in our savings tables

The rate has already been cut from its high of 4.65 per cent since February last year to 3.8 per cent this month, down from last month’s rate of 4 per cent.

That’s an overall fall of 0.85 percentage points – more than the 0.75 cut to the Bank of England base rate during that time.

In today’s draw, NS&I expects to pay out a huge £20 million less than last month, but there will still be two winners of the £1 million jackpots. 

The odds of winning any prize are still at 22,000 to one, and we have yet to see if this latest cut has dimmed the public’s affection for Premium Bonds.

After all, the appeal of Premium Bonds is not just the chance of winning a tidy sum each month.

They have the added attraction of being tax-free. That looks tempting when we are at risk of having to pay tax of as much as 45 per cent on our ordinary savings accounts.

Once you’ve exceeded your personal savings allowance (£1,000 for basic-rate taxpayers, £500 for higher-rate taxpayers), you pay tax on your interest at your income tax rate.

And besides, there is nothing else quite like Premium Bonds – other savings providers

can’t compete with NS&I handing out huge tax-free prizes every month.

Some try but they are small fry compared with Premium Bonds. For example, Family BS has its Windfall Bond (which pays a variable rate of interest, currently 3.5 per cent) which offers a monthly draw with winnings of £100 to £50,000.

Halifax and Bank of Scotland Savers Prize Draw hands out monthly prizes of between £100 and £100,000.