Premium Bonds holders more likely to win big as NS&I ups prize rate AGAIN

NS&I Premium Bonds holders more likely to win big as prize rate upped to 14-YEAR high… and Income Bond and Direct Isa customers benefit too

  • Britain’s biggest savings firm has hiked Premium Bond payouts to a 14-year high
  • Number of prizes worth £50 to £100,000 will increase from next month’s draw 
  • NS&I has also increased rates on Direct Isas, Direct Savers and Income Bonds

Customers with National Savings and Investments (NS&I) Premium Bonds are now more likely to win, as the firm is hiking its prize fund rate from 3 to 3.15 per cent.

The increase takes the Premium Bonds prize rate to a 14-year high, and marks the second hike in a month to NS&I’s flagship savings deal. 

NS&I increased the rate from 2.2 to 3 per cent on January 1, and the new 3.15 per cent rate applies to draws from February.

NS&I customers can now get a higher interest rate across several different products

The ‘prize rate’ is effectively the Premium Bonds interest rate. Because Premium Bonds pay out every month following a lottery, there is no guaranteed interest rate – unlike other savings products.

Instead, NS&I uses a prize rate to let customers know, on average, how much money they might get back in a year from their Premium Bonds. Prizes start from £25 and run all the way up to £1million.

>> Is it a good time to buy Premium Bonds? 

What are the odds of a Premium Bonds win?

Even with the latest update, the odds of each £1 bond winning a prize will remain fixed at 24,000 to 1. 

This is because while the number of prizes worth £50 to £100,000 will increase from next month’s draw, the number of £25 prizes will fall.

Premium Bonds record 

The highest Premium Bonds rate ever was 7.75 per cent between November 1984 and July 1987 with odds of winning at 11,000 to 1.

The idea is to entice more people to take out Premium Bonds, according to Hargreaves Lansdown senior personal finance analyst Sarah Coles.

She said: ‘By hiking the number of £50 and £100 prizes, it ensures that smaller wins still feel significant, and by increasing the number of life-changing prizes, it offers a huge draw when money is tight.

‘The higher prize rate has come alongside a rebalancing of the prizes. The number of £25 prizes will actually fall back just over 9 per cent to 2.376 million, while the number of £50 and £100 prizes are up just over 10 per cent to 1.28 million. 

‘The number of prizes at each level between £500 and £100,000 are also up roughly 5 per cent.’ 

Premium Bonds are the UK’s biggest savings product, with more than 21 million people saving more than £119 billion in them. 

>> Earn more interest on your savings WITHOUT switching: We reveal the best rates on offer at seven big high street banks 

Premium Bonds: How do they work?

Premium Bonds customers buy bonds at £1 each, but must now buy at least £25 in one go.

Every month, each bond is entered into a lottery.

Each bond can win several times over – or never.

Customers can cash their bonds in whenever they like, but might have to wait a couple of days to get the cash.

All prizes are tax-free.

Direct Saver, Income Bonds and Direct ISA rates rise

Premium Bonds are not the only product getting a sweetener from NS&I.

The Treasury-backed savings provider is also hiking rates on its Direct Saver and Income Bonds easy access deals, from 2.3 per cent to 2.6 per cent.

Meanwhile, the interest rate on NS&I’s tax-free Direct Isa will increase from 1.75 per cent to 2.15 per cent, while the firm’s Junior Isa is going up from 2.7 per cent to 3.4 per cent. 

NS&I chief executive Ian Ackerley said: ‘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. 

‘Today’s changes ensure that we continue to balance the needs of savers, taxpayers and the broader financial services sector.’