National Savings & Investments (NS&I) has increased the prize rate on Premium Bonds to 3.8 per cent from July, up from 3.3 per cent in April. The odds of winning have improved to 22,000 to one, and an extra 322,000 prizes will be added to the £60 million prize fund.
Despite the rise, money experts note that NS&I still trails competitors. Sarah Coles of AJ Bell said it was “embarrassing” for NS&I to have fallen behind, as easy access accounts pay over 4 per cent. NS&I also raised rates on Direct Saver (3.45%), Income Bonds (3.45%), Direct ISA (3.8%), and Junior ISA (3.7%), but best-buy accounts still offer 4.5% or more.
Andrew Westhead, NS&I Retail Director, said the changes reflect market conditions and help meet the Net Financing target. Premium Bonds, introduced in 1956, allow holdings up to £50,000, with prizes from £25 to £1 million.
Rachel Springall of Moneyfactscompare.co.uk noted that while savers may welcome the increases, top easy access rates exceed 4 per cent and fixed accounts pay over 4.5 per cent. However, NS&I is 100 per cent backed by HM Treasury, which appeals to risk-averse savers.
The savings market is volatile due to expectations of Bank of England rate rises. AJ Bell’s Coles warned that with average luck, Premium Bond holders may win nothing in a typical month, risking loss of spending power after inflation. A Freedom of Information request found fewer than 1 per cent of prizes go to those holding under £1,000.
Greig Bingham of Broadstone noted a shift in prize composition: the proportion of £25 prizes fell from 47% to 37%, directing more funds to higher-value prizes. In March, NS&I admitted owing hundreds of millions in compensation for admin errors on 37,000 accounts.
