I have now cashed in all my Premium Bonds. It's been a long time coming, but the latest cut to the prize rate was the final straw. I've decided I'm better off with my savings elsewhere and spending £2 a week on a lottery ticket.

National Savings & Investments (NS&I) announced last week it was cutting the prize rate for Premium Bonds again. The prize rate represents the return someone who is averagely lucky can expect to get.

From the August prize draw, it will drop to 3.6 per cent, down from the current 3.8 per cent and well below the peak of 4.65 per cent back in September 2023. It's also the second cut to the prize rate in just a few months – before April, it was 4 per cent. 

I've had the maximum £50,000 stashed in Premium Bonds for the past 12 months, after receiving an inheritance. It seemed a good place to keep the money while I decided on a long-term plan. Each month, I'd check the app for any prizes.

I always know by then that I haven't won £1million, as press releases the day before reveal the region where the winners live. Occasionally, I read they are from my home region of North Yorkshire, and I hope for a phone call. In the past year, I've won £1,050, from small £25 to £100 prizes each month. That sounds great until you realise it's a return of just 2.1 per cent.

Before the inheritance, I never had more than a few thousand pounds in Premium Bonds. When savings rates were low, it was where I stashed the money to pay my tax bill.

My biggest ever single win was £500 back in July 2021 – other than that, I've never won more than £100 at a time. Usually, it's been £25 every few months. 

But I enjoyed it and put any winnings into my holiday account, which contributed to some memorable trips. Although that's more a weekend in the Lake District than a fortnight in the Maldives.

I would have done far better if my money had been in a best-buy instant access savings account. 

Laura Suter, personal finance director at investment platform AJ Bell, says: 'Premium Bond rates are now significantly below the top rates in the market, meaning savers are paying a hefty premium for the safety and brand name of NS&I.

'The top easy-access account on the market pays 5 per cent interest, so someone with £20,000 would be sacrificing £280 of interest a year by sticking with Premium Bonds – and that's assuming they even get the average return, which many don't.'

I certainly haven't been.

NS&I is a little different to your average bank. It is backed by the Treasury, and the money you deposit is lent to the Government. 

The Government sets fundraising targets for NS&I, and it alters its interest rates to attract more money when needed.

The current target is £12billion with a range of £4billion above or below that. But NS&I can't just offer stonking rates to meet its targets – it isn't allowed to disrupt the wider market. 'NS&I pledges to be middle of the road, and as the road has moved into less rewarding territory, it was bound to make this cut,' says Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown.

But middle of the road isn't good enough for my nest egg. Especially when you remember that all-important phrase, 'averagely lucky'. In reality, the vast majority of Premium Bond holders won't be lucky at all. Research by AJ Bell shows that of the 22.7 million with bonds, 14.4 million have never won a single prize. Ever.

That's because to achieve average luck with prizes that start at £25, you need to hold a decent amount. Many Premium Bond savers fall below that threshold, with only small holdings. Charlene Young, senior pensions and savings expert at AJ Bell, says: 'The chance of winning any of the top prizes, from £5,000 all the way up to £1 million, remains minuscule.'

Obviously, there are some attractions to Premium Bonds – there's a reason I've held them on and off for decades. Like most, I started with some that I was gifted as a child. I added to that as and when I could. 

When I went freelance, it seemed a great place to save money ready for my tax bill. What's better than using money you owe the taxman to possibly win £1 million? And Premium Bond winnings are tax-free, but this matters more if you've maxed out your ISA allowances and tax-free Personal Savings Allowance.

This is £1,000 a year if you're a basic rate taxpayer, £500 for higher rate taxpayers, and nothing for additional rate payers. Your money is also safe with NS&I as it is backed by the Treasury. 

The dream of winning the £1 million jackpot kept me loyal to Premium Bonds for over 40 years, but it is time to accept that my chances are pitiful.

There are plenty of ways my money can earn far more than 3.6 per cent, and many of them don't involve any luck. Just me putting in the legwork to find the most rewarding home for my savings. 

So I've finally pulled the plug on my Premium Bonds. It is a wrench, but I can be just as smug about my guaranteed interest instead. 

I've also woken up to the fact that holding £50,000 in what is effectively an instant-access savings account makes no sense. 

If I want to make that money work, it is better split between investments, fixed-rate bonds and instant-access savings. So that's exactly what I've done. I've maxed out my ISA allowance in a stocks and shares ISA and invested in a range of income-generating funds.

If you're moving from Premium Bonds to investments for the first time, Victoria Hasler at Hargreaves Lansdown suggests two lower-risk options: the Troy Trojan fund, which aims to grow money steadily with a mix of assets, and the Ninety One Diversified Income fund, which yields 4.99 per cent and is designed to cushion investors when markets fall.

I have put a chunk into Cynergy Bank's two-year fixed-rate bond paying 4.45 per cent, and the rest is earning 4.75 per cent in Atom Bank's Instant Saver Reward account.