£1m Premium Bond jackpot to be axed

One of the two £1 million Premium Bond jackpots is to be axed as the total value of monthly prizes is cut from £59 million to £32.2 million.

The changes, due to be in force for the next draw in April, have been announced by the Government's National Savings and Investments (NS&I) group.

It follows the decision to cut the prize-fund rate from 1.8% to 1% - the first reduction since December 1, when the Bank of England base rate stood at 3%.

The group says it will use the money from the other jackpot to increase the mix of prizes, including a new £25 prize, and that the odds of winning will remain unchanged at 36,000 to 1.

While the move means that the total value of prizes paid out each month will fall, the number of prizes distributed will remain broadly unchanged at just under 1.1 million.

Peter Cornish, director of customer offer at NS&I, said: "Replacing one of the £1 million 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."

There has been a growing demand for Premium Bonds amid the credit crunch as people seek the security of a government guarantee.

The group says it is cutting returns on variable rate products by up to 0.5%. Its Direct ISA will now pay interest of 1.3%, while the rate on its Cash ISA has been cut to 0.5%.

Income bonds will now pay returns of between 0.7% and 1%, depending on how much people have invested, while rates paid on the group's Investment Account range from 0.2% to 0.3%.