National Savings & Investments is increasing the number of Premium Bond prizes it pays out every month, boosting its 22million savers’ chances of winning.
Millions of pounds more in Premium Bonds prizes will be up for grabs from next month as NS&I increases the prize fund rate from 1.4 per cent to 2.2 per cent.
This beats the top easy-access savings rate in the independent This is Money savings tables of 2.1 per cent.
However, this is the underlying rate and many will win no prizes over the course of the year, unlike interest from a bank which is guaranteed.
Prize boost: Millions of pounds more in Premium Bonds prizes will be up for grabs from next month.
From next month, the monthly odds of winning for every £1 in Premium Bonds will improve from 24,500 to one to 24,000 to one, adding an expected £76million to the prize fund for October.
This will swell from nearly £139million in September, to £218million in the October draw. This is mainly due to the fact NS&I is boosting the number of bigger prizes on offer.
The changes will see the number of £5,000, £10,000, £25,000, £50,000 and £100,000 prizes almost double.
Notably, there will be 18 £100,000 prizes from 10 in September, and 35 £50,000 prizes, up from 20.
There will also be 19 times’ as many £50 and £100 prizes paid out from October, while there will be 1.3million fewer £25 prizes.
This is the second time NS&I have hiked the prize fund rate this year.
It previously increased the prize fund rate on Premium Bonds from 1 per cent to 1.4 per cent in June. The odds at that time changed from 34,500 to 1 to 24,500 to 1.
Up until that point, NS&I had held the amount it paid out in monthly prizes at 1 per cent, despite the base rate having risen tenfold during that time – from 0.1 per cent to 1 per cent.
Since then, the Bank of England has increased the base rate by 1.25 percentage points from 1 per cent to 2.25 per cent.
Ian Ackerley, chief executive of NS&I said: ‘With over 22million holders, Premium Bonds are the nation’s favourite savings product and are more popular than ever.
‘It’s great to be able to increase the prize pot and give our customers more chances each month to win tax-free prizes.
‘This is the second increase to the Premium Bonds prize fund rate that we have made in less than six months.
‘These changes have helped us ensure that Premium Bonds remain attractive, while also ensuring that we continue to balance the interests of savers, taxpayers and the broader financial services sector.’
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Have Premium Bonds become a good deal?
The underlying rate of 2.2 per cent sounds competitive. However, this does not mean that all holders receive a 2.2 per cent annual return.
Most will receive nothing in any one month: that is the trade-off for the chance of winning big prizes. For every one person who wins big, tens of thousands more win nothing.
Of course, the flip side to this is that a few lucky people do win one of the big prizes. Some people may be ready to relinquish a guaranteed interest payment from a savings provider in favour of even a minuscule chance of winning big.
The best easy-access savings account – offered by Al Rayan – now pays 2.1 per cent. If you had £50,000 in savings – which is the maximum you can put into Premium Bonds – that’s a not insubstantial £1,060 a year of interest.
If you’re happy to put your money away for a year, you can get a rate of 3.9 per cent with Investec – £1,985 on a £50,000 balance.
But with inflation at 9.9 per cent, no savings account comes close to protecting the value of cash.
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