NS&I is adding an extra £66m to its Premium Bond prize fund from September, boosting bondholders’ chances of winning big-value prizes.
The number of £50,000 prizes given in September will rise to an estimated 181, up from 154 in August, whilst there will be 90 prizes of £100,000, up from 77 this month. However, the number of £25 prizes available will reduce from 1.70m in August to 1.03m in September. Overall, Premium Bonds will have an effective interest rate of 4.65% from September, up from 4% in August, and the odds of winning a Premium Bond prize will improve from 22,000 to 1 to 21,000 to 1, their best level since April 2008.
Greig Bingham, head of financial modelling at actuarial consultancy OAC, said: “The rate of return for the average saver will increase by around 16% in September, however the odds of winning a prize have only risen by 5%. This is due to a large shift from smaller £25 prizes to larger £50 and £100 prizes.
“The odds of winning a £25 prize were 71,000-1 but have now risen to 118,000-1 – a decrease of 40% in probability. Contrastingly, the odds on £50 or £100 have jumped by 25%, moving from 32,000-1 to 26,000-1.”
Bear in mind, however, that even though the prize fund rate increase is great news, not everyone will benefit. Myron Jobson, senior personal finance analyst at interactive investor said; “The Premium Bond prize fund rate will hit a 24-year high from next month - but that doesn’t mean that the average person will get the heightened rate on their savings.
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“Premium Bonds can be fun lottery-style alternatives to an easy access savings account and might tempt some savers hoping to bolster their wealth amid the cost of living crisis. But the fact remains that while some savers might be lucky enough to hit the jackpot or win big early on, others may save and wait for long periods for even a small return.”
NS&I is also raising the rates on several of its other savings products, with these changes coming into effect from 18 August. For example, the interest rate paid to Direct Saver customers will increase to 3.65% from 3.40%, whilst the rate paid on NS&I’s Direct ISA will increase to 3.00% tax-free from 2.40% tax-free. However, these returns are far from market-leading. For example, according to savings website SavingsChampion.co.uk, the best easy access savings account from Tandem currently pays an impressive 5% with no minimum deposit requirement, whilst the best cash ISA from Shawbrook Bank pays 4.43% on a minimum deposit of £1,000.
Helen Morrissey, head of retirement analysis at Hargreaves Lansdown said: “However, there are other reasons why savers would choose to use NS&I rather than another account potentially paying more. The 100% Treasury guarantee makes it a handy choice for those with large amounts to save without worrying about the £85,000 Financial Services Compensation Scheme limit that applies to other savings products and so, from this point of view, they will continue to attract interest.”