NS&I (National Savings and Investments) will improve the odds for Premium Bonds holders from the September draw, with the chance of winning shortening to 21,000 to one from 22,000 to one. The prize fund rate will rise to 4.35 per cent from 3.80 per cent, increasing the prize pot by around £63 million to more than £497 million. An estimated 308,000 additional prizes will be available compared with the August draw.
Prize increases and changes
There will be 12 extra £100,000 prizes, 27 more £50,000 prizes and an additional 51 £25,000 prizes in September. The number of £1 million prizes remains at two. However, the estimated number of £25 prizes will drop from 2,289,959 to 1,717,659.
Andrew Westhead, NS&I retail director, said: “Not only is NS&I boosting Premium Bonds from September, but from today we are also increasing interest rates for our British savings bonds, plus our direct saver and income bonds. This is to ensure we reflect current market conditions and help to meet our net financing target. This is the second time this year we have been able to increase Premium Bonds prize fund rate and shorten the odds.”
Other NS&I rate changes
NS&I’s variable rate direct saver and income bonds accounts have increased from 3.45% AER to 3.75% AER. Both new and existing customers with maturing British savings bonds will also see improved rates. One-year bonds have risen from 4.72% AER to 4.82% AER, two-year deals from 4.70% AER to 4.8% AER, three-year bonds from 4.68% AER to 4.83% AER, and five-year bonds from 4.75% AER to 4.85% AER.
Sarah Coles, head of personal finance at AJ Bell, said: “NS&I is pulling out all the stops to attract the cash it needs. It has decided there’s no point tinkering around the edges: a raft of rates have to rise – including pulling the trigger on the big gun of Premium Bonds.” She described the new one-year bond rate as “unusually competitive” and close to the most competitive options, adding: “Given that this is the most popular term to fix your savings over, it’s clearly hoping to persuade rate-chasers to make a small compromise in order to secure a rate that’s 100 per cent backed by the Treasury.”
Market comparison and advice
Caitlyn Eastell, a personal finance analyst at Moneyfactscompare.co.uk, said of Premium Bonds: “Despite the improved odds, they are a game of chance and the 4.35% shouldn’t be mistaken for a headline rate. With the cost of living continuing to weigh on household budgets, it’s understandable savers may not want to leave their returns to chance. The best easy access Isas pay over 4.50% and returns could be even higher if they’re willing to lock away their cash.”
She added of the bond rate increases: “While the latest hike has made their bonds more attractive, savers should still shop around. NS&I’s rates should be compared to the wider market as the highest paying fixed bonds now pay 5%. But savers will also need to pause and assess where the best home for their money is.”
