Millions of holders of premium bonds will see the prize fund rise to its highest level in 24 years and their chances of winning a prize increase from September’s draw.
NS&I, the government-backed organisation that runs the monthly draw, said it would increase the rate from 4% to 4.65% next month, adding £66m to the prize fund.
The chances of winning for each bond will go from 22,000-1 to 21,000-1 – the best level since April 2008 – and there will be more prizes on offer worth between £50 and £100,000.
The changes, which follow recent increases in the Bank of England base rate, will come as welcome news to the 22.4 million savers who hold between £25 and £50,000 worth of bonds.
Savers with some of NS&I’s other accounts will also see their returns rise, as the organisation announced new rates for a range of products.
From 18 August, the Direct Saver and Income Bonds accounts will pay 3.65%, up from 3.4%, the Direct Isa will pay 3%, up from 2.4%, the Junior Isa will pay 4%, up from 3.65%, and the Investment Account will pay 1%, up from 0.85%.
NS&I’s chief executive, Dax Harkins, said: “These upcoming increases show that we’re supporting savers up and down the country.
“Premium bonds are one of the nation’s favourite savings products, so increasing the prize fund rate to its best level since 1999 and improving the odds means that more people will have the chance to win prizes each month.”
Laura Suter, the head of personal finance at the advice firm AJ Bell, said it was inevitable that NS&I would increase rates as savers had been pulling money out of its products in recent months.
“Taking a punt on premium bonds was a more attractive gamble when interest rates were rock bottom. But now savers are giving up returns of 5% on easy access accounts for the chance they might win big on Ernie, which is a tougher call to make,” she said.
“The rates on a whole host of other NS&I accounts are also increasing, but none of them are market-beating. That means to be using NS&I you’d need to have another motivation other than getting the highest possible return. For some, this will be the higher protection than the Financial Services Compensation Scheme offers or the ability to shelter their savings from tax.”
