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The prize rates offered on Premium Bonds could fall, after the Chancellor froze the National Savings & Investment (NS&I) fundraising targets.
The rates on their savings products have already begun to drop, with the offer on their three-year “green” bond being slashed to 3.95pc from 5.7pc earlier this month.
The target for the savings body remained £7.5bn in the small print of Wednesday’s Autumn Statement, following speculation that it could be pushed up.
NS&I, which is Treasury-backed, raked in £9.8bn from savers in the last six months. It can earn either £3bn more or £3bn less than its government target.
Part of its success can be attributed to a market-leading 6.2pc rate on a one-year fix which was launched in August, before being pulled off the market in early October.
The body has to balance the competitiveness of the market against the fundraising needs of the Government, meaning it typically launches big rates when it is struggling to raise cash.
More than £7.7bn of the money raised this tax year from NS&I came from the second quarter, when the 6.2pc rate was available, as the account received approximately 250,000 applications.
Premium Bonds prize rates have shot up over the course of this year, jumping to the equivalent of 4.65pc, the best offering since 1999.
Each saver can hold up to £50,000 in Premium Bonds, with each £1 offering a single entry to a monthly draw, which offers tax-free prizes.
The odds of Ernie, NS&I’s electronic number generator, drawing a saver’s number improved from 22,000 to one to 21,000 to one in August, adding £66m to the prize pot.
But if the savings body no longer needs to raise as much money, rates are likely to fall.
Sarah Coles, of broker Hargreaves Lansdown, said: “With the fundraising target frozen, it means NS&I isn’t going to need to work hard to attract more cash. The concern for Premium Bond savers is whether they will take the opportunity to cut the prize rate.”
She added: “Given we’re likely to be at the peak for interest rates, prizes will undoubtedly get less generous eventually. However, there’s every reason to be hopeful they’ll stay put for a while yet. At the moment, the best rates on easy access accounts are proving resilient, and holding up above 5pc.”
Anna Bowes, of Savings Champion, said: “If NS&I continues to attract more cash, it’s possible that they may need to adjust the interest rates applied downwards, to some of the savings products, in order to stem the flow.
“Of course, although there were several rate hikes to the Premium Bond prize fund and other variable rate accounts earlier this year, there’s not been anything for a while, so they are far less competitive now.”
Laura Suter, of investment platform AJ Bell, said: “Savers should brace themselves for rate cuts on NS&I accounts and for the Premium Bond prize fund to fall – as the Government-backed provider has already exceeded its fundraising target for the tax year.
“The success of NS&I’s one-year guaranteed bonds this summer saw huge numbers of savers put their money in the accounts and means that the provider leapt past its £7.5bn annual fundraising target in just six months.”
While more than 22 million people hold money in Premium Bonds, the average winner so far this year has nearly £39,000 stashed away in the bonds.
A saver with £1,000 faces waiting three years to win £50 or £100 – and would have to become the oldest person to have ever lived at 124 to win £500.
Even those who hold the maximum value of £50,000 in the tax-free pot face waits of six years and six months to claim £1,000 and nearly 80 years for £5,000.
A spokesman for NS&I said: “In a dynamic savings market, we have supported savers with successive interest rate increases across many of our variable and fixed term products.
“Inflows and outflows vary throughout the year depending on customer priorities and the products on offer, so Net Financing can differ from quarter to quarter. We currently expect to end the year within the Net Financing target range of £4.5 billion to £10.5 billion.
“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.”
Other savings rates have also begun to fall, following the Bank of England decision to hold the Bank Rate at 5.25pc.
The rate had been increased at 14 consecutive meetings, starting in December 2021, in an attempt to stifle inflation.