Premium Bonds are paying out a dismal prize rate. Unsurprisingly, savers voted with their feet when the rate fell from 3.6 pc to 3.3 pc last month. Nearly £100million was taken out of the bonds in April.

The 3.3 pc rate – its lowest rate for three years – is well below the average savings rate. The rate looks even worse when held up against the 4.25 pc you can earn on an easy-access, tax-free cash Isa.

But you might want to think twice before cashing out any more because my gut instinct is the prize fund rate is about to start rising again in the coming months.

In the decades I’ve been writing about Premium Bonds, I’ve learned to spot the early signs of a rate turnaround.

The simple truth is that National Savings and Investments (NS&I) needs to keep the prize fund competitive to attract money.

If it stays at its current level of 3.3 pc, more of us could abandon NS&I for richer pickings elsewhere as rivals raise savings rates.

NS&I’s cash needs became evident a couple of weeks ago when it bumped up the rate on its Guaranteed Growth and Income Bonds – with its one-year rate up at 4.5 pc, making it one of the best rates around.

The Bank of England is expected to increase interest rates some time in 2026 and could nudge the base rate up by 0.25 percentage points next month to 4 pc. This would put pressure on NS&I to act. 

Yet even if the Bank holds rates steady, the Premium Bond rate could still rise. This is because NS&I needs to attract a near-record amount of money from savers this year.

But it is currently failing to do so. Doubtless, many savers decided it was better to earn a decent level of tax-free interest rather than hope for the dwindling chance of winning a prize. In April’s draw NS&I paid out 5.9 million prizes – nearly 270,000 fewer than in March.

A £20,000 holding in Premium Bonds guarantees you nothing, while you are set to see a healthy £850 tax-free return with a top easy-access Isa rate. Or you could see £900 if you are happy to tie your money up for a year in an account from the likes of Nationwide which has come out with a rate of 4.5 pc.

Haemorrhaging money from Premium Bonds is not good news for NS&I, which has been tasked with bringing in a huge £15billion (with a £4billion leeway each side) during its current financial year which started in April. That’s 15 pc more than last year.

The fiasco at the Treasury-backed bank a couple of months ago has not helped. It emerged that NS&I has mislaid up to £476million of nearly 40,000 bereavement claims for Premium Bonds, which has likely added to the outflow.

More details on how it is solving this problem are due this month.

More than 22 million of us still take a punt each month with Premium Bonds, hoping to win one of two £1million tax-free prizes. I’m confident there’s light at the end of the tunnel for those who hang on to their Bonds.

A Barclays account with a difference

I’m not usually a fan of the big banks but they have stepped up to the mark recently in the fixed-rate battle.

Here’s an account with a difference which could appeal – Barclays Single Access 1-Year Flexible Cash Isa.

The 4.36 pc rate, fixed for a year, is not the very top rate but it is up there with the leaders.

You’ll earn £436 tax-free interest for every £10,000, versus £454 with the best one-year rate from Charter Savings Bank.

The Barclays account lets you take out up to 10 pc of your money during the year without losing interest.

It’s also flexible, so if you do take money out you can replace it in the same tax year without the replacement counting towards your Isa allowance.

Don’t forget to move your money once the year is up, as you can expect a lousy rate after this.