Premium Bonds prize fund rate has been boosted by NS&I

Last month, National Savings and Investment (NS&I) confirmed the rate change would be introduced for February 2023’s prize draw. People with bonds have an opportunity to win this prize from the NS&I product every month.

What are the odds of winning the £1million Premium Bonds jackpot?

Even with this change, the odds of a saver’s £1 Bond winning a prize remains at 24,000 to one.

However, the changes mean that the number of Premium Bonds prizes worth £50 to £100,000 have risen as of this month’s draw.

According to NS&I, this wave of rate hikes was carried out to make sure the financial institution’s products remain “competitive” on the market.

This comes as high street banks and building societies have raised interest rates in recent months across their savings accounts.

What are Premium Bonds?

Unlike normal accounts, NS&I’s premium savings product does not pay interest in the traditional way other high street banks and building societies do.

Bond holders are automatically enrolled into a monthly prize draw where they have the chance to take home prizes, with the jackpot being £1million.

There are other cash prizes Premium Bond holders can get including £100,000, £50,000 or £25,000, with the lowest prize value being £25.

At the start of every month, NS&I announces the two winners who have succeeded in getting the £1million jackpot.

What is the new rate for Premium Bonds?

As of this month’s draw, the prize fund rate has been raised from three percent to 3.15 percent.

Prior to this, the prize fund rate for Premium Bonds was increased from 2.20 percent to three percent the month before.

On top of this, NS&I has hiked rates across its other products with the interest paid on Direct Saver and Income Bonds going up from 2.30 percent to 2.60 percent.

At the same time, the financial institution’s Direct ISA has seen its interest rate go up from 1.75 percent tax-free to 2.15 percent tax-free.

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Ian Ackerley, the NS&I’s chief executive, previously shared why the financial institution has changed its interest rates at this moment in time.

He explained: “Today’s changes will provide a welcome boost for savers of all ages across the country, with more Premium Bonds prizes and some of the highest interest rates we’ve seen in over a decade.

“In a fast-changing savings market, we’re committed to making sure our products remain competitive and our customers get a good return on their savings.

“[These] changes ensure that we continue to balance the needs of savers, taxpayers and the broader financial services sector.”

However, AJ Bell’s head of personal finance Laura Suter warned that savers need to read the “small print” when it comes to how the prize fund rate and the likelihood of winning money.

Ms Suter added: “Your odds of actually winning a prize haven’t improved and remain at 24,000 to one for each £1 bond you hold.

“But if you do win a prize you’re more likely to win a bigger sum, as the prize fund has been boosted.

“While lots of people are drawn in by the government-backing and the tax-free nature of Premium Bonds, the majority of people would likely be better off opting for a standard savings account and getting a guaranteed interest. The top easy-access savings account currently pays 3 percent but you can get more interest with fixed and notice accounts.”

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