NS&I bumps up interest rate on Premium Bonds again

National Savings & Investments has bumped up the interest rate on Premium Bonds again at the same time when rate increases on some of its other products also kicked in. If you’re on the lookout for the best savings accounts for your cash, then could NS&I be worth another look?

The Premium Bonds prize fund rate will jump from 3% to 3.15% (effective from the February 2023 prize draw), representing another increase after the rate went up from 2.2% to 3% on 1 January 2023.

Other product rate increases include:

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues free

Sign up to Money Morning

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter

Sign up

• Direct Saver - up 2.3% to 2.6%
• Income Bonds - up 2.3% to 2.6%
• Direct ISA - up from 1.75% tax-free to 2.15% tax-free
• Junior ISAs - up from 2.70% tax-free to 3.40% tax-free

More than 870,000 customers holding NS&I’s Direct Saver, Income Bonds and Direct ISA will benefit from the increased rates, plus 80,000 junior ISA account holders.

The new rate on income bonds at 2.6% is the highest NS&I is paying since 2008, and 2.15% on the direct ISA product is the highest seen in a decade. And the latest rate rise on the direct saver product at 2.6% is not the highest since it launched in March 2010.

Premium bonds rate rise - now at highest level in 14 years

The rate rise on premium bonds is the fourth increase NS&I has made in the last 12 months in a bid to lure savers into the government backed bank.

If you have premium bonds the rate actually means the number of prizes, worth between £50,000 and £100,000, will increase - so there’s a higher chance of you bagging a larger amount of prize money from February 2023.

NS&I chief executive, Ian Ackerley, said: “Today’s changes will provide a welcome boost for savers of all ages across the country, with more Premium Bonds prizes and some of the highest interest rates we’ve seen in over a decade.

“In a fast changing savings market, we’re committed to making sure our products remain competitive and our customers get a good return on their savings. Today’s changes ensure that we continue to balance the needs of savers, taxpayers and the broader financial services sector.”

However, despite the increases it is worth noting that the rates are not necessarily market leading and it will pay to shop around, as banks and building society rates on savings products have been creeping up in recent weeks; and with the Bank of England expected to increase interest rates again next month, better rates may well be on the horizon.

It's also worth noting that none of these rates are market-leading. For non-ISA savings you can make 2.9% elsewhere from the first £1, without any restrictions, and even for ISA savings you can make 2.75% on the same basis. And you could get 3.8% on cash junior ISAs from Coventry Building Society.

“This is effectively NS&I playing catch up after the easy access market has crept up with successive interest rate rises,” Sarah Coles, head of personal finance at Hargreaves Lansdown commented.

What are the chances of winning per bond?

According to NS&I, this is the estimated number of prizes we can expect to see next month.

Number and value of Premium Bonds prizes

Source: NS&I