NS&I says that the pot has got smaller, thanks to recent rate cuts.
Interest rate cuts from the Bank of England have hit the premium bond market hard, operator National Savings & Investments (NS&I) has revealed.
The bonds' regular prize draws are popular with many savers - indeed, around one Briton in three is thought to own them. However, the Bank's policy of aggressive reductions to its official rate since October 2008 has made the chances of hitting the jackpot smaller than before.
This is because the prize fund is calculated by totting up the amount of interest the total value of eligible bonds accumulates over a one-month period. Therefore, as interest rates shrink, so does the fund.
Accordingly, January 2007's pot of £114 million dropped to just £57 million this month. Over the same period, the Bank reduced its base rate by more than 300 basis points.
NS&I spokesperson Angela Mason said: "The rate of return on premium bonds, as with other savings products, is influenced by economic circumstances. Given the historically low levels the base rate has now reached, we are looking closely at all the options available to us so that we can make the right decision for all premium bond holders.
"People invest in premium bonds for different reasons. This may be for the chance and excitement of winning large prizes, or many regular tax-free prizes or because premium bonds are simple to manage and can offer easy access to their investment."
The premium bonds survey was taken prior to the latest rate cut from the Bank, which was announced today. The new official rate stands at 1.5 percent, down from December's two percent - the lowest since the institution was founded in the 1600s.
