National Savings & Investments has axed an estimated 48,000 prizes this month, while cutting more than £7million from its prize pot.
Two £1million prizes remain but the estimated number of £100,000 prizes is set to fall, alongside the £25,000 and £10,000 prizes.
The biggest change will be the reduction in £100 and £50 prizes which will be slashed by two-thirds.
However, the odds of bagging a piece of the pot will stay at about one in 30,000 due to an increase in £25 prizes.
In total, NS&I estimate the total number of prizes will be 2,219,493 in May, compared to the 2,268,165 given out in April.
Hannah Maundrell, editor in chief of Money.co.uk, says the move may prompt savers to think again about Premium Bonds.
She said: “If you’ve got a chunk of your money invested in NS&I Premium Bonds it really is time to start weighing up your options. “While the average bond holder receives a return of 0.98 per cent, you could still be one of the many that don’t get any return at all.
“If you’re attracted by the ‘tax free’ feature of prizes, keep in mind a basic rate taxpayer can now earn £1,000 a year in interest without having to pay tax.
“Based on today’s savings rates, you’d need a savings pot of more than £70,000 before you need to pay any tax.”
The move, announced in February, comes alongside a cut in interest rates on NS&I accounts.
Rates on the bank’s Direct Isa will fall from one per cent to 0.75 per cent from today, as will its Income Bonds.
NS&I’s Direct Saver will drop from 0.8 per cent to 0.7 per cent. The changes, including those made to Premium Bonds, will impact more than 21 million customers.
Steve Owen, acting chief executive at NS&I, said: “We appreciate that savers will be disappointed but we believe that the new rates present a fair offer to customers who will continue to benefit from our 100 per cent HM Treasury guarantee on all holdings as well as tax-free prizes for Premium Bonds.”