Premium bond holders scooped more than £218m in prizes this month, after National Savings & Investments (NS&I) added another £76m to its prize fund.

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The number of £5,000, £10,000, £25,000, £50,000 and £100,000 prizes has almost doubled, with the odds of each £1 premium bond number winning a prize having improved from 24,500 to one to 24,000 to one.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said; “More than 22 million people hold premium bonds, and during tough economic times more people tend to be drawn to this kind of offering. It gives people hope that a life-changing win could lift them out of their financial struggles completely.

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“If you are considering premium bonds, it’s important to understand the price you pay – because you don’t earn any interest on your money so if you have average luck, over time the spending power of your money will be devoured by inflation.”

The prize fund rate on premium bonds now stands at 2.20%, although returns are not guaranteed and it’s purely down to luck how many prizes – if any – you’ll win. However, now that the prize fund rate has increased, premium bonds may appear an attractive alternative to easy access savings accounts for those prepared to accept the risk that they might not win anything at all. You can access money invested in premium bonds whenever you want, although you’ll need to wait three working days to get your funds back.

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Myron Jobson, senior personal finance analyst at interactive investor, said: “Even though the odds of winning a prize have improved a smidge, the fact remains that while some savers may 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.”

The best easy access account currently available, Santander’s limited edition eSaver account, pays 2.75% annual interest before tax on a minimum deposit of £1. If you were to invest £50,000 into this account, you’d earn £1,392 in interest after a year. If you put the same amount into premium bonds, which is the maximum you can currently invest in them, then assuming you had average luck and won prizes equivalent to the 2.2% prize fund rate, you might win £1,060 over a year – although you could also end up empty handed.

Anna Bowes, founder of savings website Savingschampion.co.uk said: “A key thing to be aware of with premium bonds is that there is no guarantee that you will win anything. But with two £1 million prizes up for grabs each month, plus nearly five million other prizes of between £25 and £100,000, you could be one of the lucky ones. And any prizes won are tax free. But if you have only a small amount invested, there is a greater chance that you’ll win nothing.”

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