National Savings & Investments (NS&I) is hiking the Premium Bond prize fund rate from 3.3% to 3.7% in the July draw, its highest rate in 15 years.
This means there will be an extra £39 million in prizes available for bondholders.
The odds of each £1 Premium Bond winning a prize will remain at 24,000 to 1, with more chances each month for customers to win prizes worth between £50 and £100,000.
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It marks the sixth prize fund rate increase for Premium Bonds in just over a year, as NS&I tries to lure savers and compete with rising interest rates on savings accounts. NS&I says the changes are part of its strategy to “balance the interests of savers, taxpayers and the broader financial services sector”.
The last increase to the prize fund rate was in the March draw, when it rose from 3.15% to 3.3%.
NS&I has also announced that it is increasing the interest rate for young savers holding its Junior ISA, with the rate increasing from 3.4% to 3.65% today.
“With the Premium Bond 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,” says Dax Harkins, NS&I chief executive.
“This is the second interest rate increase for Junior ISA this year, giving a boost to over 89,000 young savers as we continue to help inspire a stronger savings culture.”
How many prizes are in each draw?
While the number of prizes worth between £50 and £100,000 will go up in July, the number of £25 prizes in the draw will fall. And the pair of £1m jackpots up for grabs each month remains unchanged.
Overall, the total number of prizes will slightly fall, but the value of all the prizes will rise by more than £39 million.
This is the estimated number of prizes we can expect to see next month (compared to this month).
Number and value of Premium Bond prizes
|Value of prizes in June 2023
|Number of prizes in June 2023
|Value of prizes in July 2023 (estimated)
|Number of prizes in July 2023 (estimated)
Are Premium Bonds worth it?
Despite the increase to the prize fund rate, it’s worth noting that a 3.7% rate is not necessarily the best on the market when compared to the top savings rates.
Easy-access savings rates have hit 4% for the first time since 2009, and the best one, two, three and five-year fixed bonds all offer 5.3% or more.
It’s also important to note that a prize fund rate is not the same as a savings rate. With the latter, the saver is guaranteed to earn that interest rate on their cash. But a Premium Bond prize fund rate is an average rate for someone with average luck.
In reality, some customers will earn less (some may not even win a single prize, especially if they only hold a small amount in bonds), while others will win more.
Myron Jobson, senior personal finance analyst at the investment platform Interactive Investor, notes: “Premium Bonds can be fun lottery-style alternatives to an easy-access savings account and might tempt some savers hoping for good luck 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. It still pays to shop around for the best deal.”
Ruth is passionate about helping people feel more confident about their finances. She was previously editor of Times Money Mentor, and prior to that was deputy Money editor at The Sunday Times.
A multi-award winning journalist, Ruth started her career on a pensions magazine at the FT Group, and has also worked at Money Observer and Money Advice Service.
Outside of work, she is a mum to two young children, a magistrate and an NHS volunteer.
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