There might not be much good financial news around right now, but at least Premium Bond holders have something to cheer about with an extra £39m in prizes up for grabs from July.
National Savings & Investments (NS&I), which provides Premium Bonds, announced earlier this month that it is increasing its prize fund rate from 3.30% to 3.70%. Although this won’t boost the chances of you winning, as these odds will remain at 24,000 to 1, the amount of prize money on offer will increase to £374m a month, up from £335m.
Dax Harkins, chief executive at NS&I said: “This is now the sixth prize fund rate increase for Premium Bonds in just over a year, making it the highest it’s been in over 15 years. With the changes, we’re expecting to pay out more than £374 million to winners in July with more higher value prizes, meaning that, each month, more lives will be changed by Premium Bonds.
The odds of winning haven’t changed because the actual number of prizes available isn’t changing very much, so there’ll be more prizes ranging in value from £50 up to £100,000, but fewer £25 prizes.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said: “The big change this month is that the number of £50 and £100 prizes has now overtaken the number of £25 prizes – with the smaller prizes being cut and the larger ones hiked. NS&I is aware that £25 isn’t what it once was, so it’s focusing its attention on slightly bigger prizes.
“There has been a bump in prizes all the way up to £100,000 – including 80 more £10,000 prizes and 160 more £5,000 prizes. It’s a sensible option – and will ensure that winning on the Premium Bonds remains an exciting day for more people.”
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If you don’t have Premium Bonds, but are considering buying some, you’ll need to bear in mind that there’s a chance you might not win anything at all. Even though the 3.70% prize fund rate is appealing, you won’t necessarily earn this rate of return, and it is possible to earn 4.21% from easy access accounts elsewhere.
For example, if you have savings of £7,500 and don’t win any prizes at all over the year, you’d have missed out on just under £316 in gross interest on your cash if you’d had it in the top paying easy access account.
Anna Bowes, founder of savings website SavingsChampion.co.uk, said: “The decision comes down to how lucky you think you will be. But Premium Bond holders who may have been on the cusp of cashing in for more secure returns from other cash savings account will possibly pause for a beat to see if they might just benefit from this increase to the prize fund. Certainly, this is great news for higher and additional rate taxpayers as any prizes earned are tax free.”