National Savings and Investments (NS&I) has confirmed a significant uplift for its 22 million Premium Bonds customers, with the prize fund rate set to increase to 3.80% from July. This adjustment marks a notable rise from the 3.3% rate observed in the most recent draw, and aims to enhance the appeal of the popular savings product.
The hike in the prize fund rate is expected to translate into an additional 300,000 prizes being distributed each month. Concurrently, the odds of any single £1 bond winning a prize will improve, moving from 22,000 to 1 to 21,000 to 1. This means that for every £25 held in Premium Bonds, customers will have a 1 in 840 chance of winning a prize in any given month.
This latest announcement comes shortly after NS&I had reduced the rate from 3.6% to 3.3% in May, a decision that had drawn criticism from some savers. The subsequent increase reflects a dynamic approach by NS&I, which aims to strike a balance between offering competitive returns to its customers and meeting its financing targets for the government.
Premium Bonds, which are backed by HM Treasury, offer a unique way to save as interest is not paid directly. Instead, savers are entered into a monthly prize draw for tax-free winnings, ranging from £25 to the top prize of £1 million. The minimum investment is £25, and the maximum holding is £50,000.
For existing Premium Bonds holders, this change will automatically apply to their holdings from the July draw onwards, with no action required on their part. New investments made before the end of June will also benefit from the improved odds and prize fund rate in the July draw.