Premium Bonds boost! NS&I adds an extra £80MILLION to the pot from January but can the new 3% rate now beat the top savings deals?
- There will be more than three times as many prizes worth £100k, £50k and £25k
- Overall odds stay fixed at 24,000 to 1 but savers more likely to scoop a big prize
- Mail on Sunday’s Jeff Prestridge called for the hike in a column last week
Premium Bonds savers will see an extra £80million added to the prize pot from January, provider NS&I has announced.
Although the odds of winning a prize of any size will stay fixed at 24,000 to one, customers will have a better chance of scooping one of the high-value prizes.
This is because the Treasury-backed bank has tripled the amount of prizes worth £100,000, £50,000, £25,000, £10,000 and £5,000 that are available.
NS&I is hiking the prize fund rate from 2.2 per cent to 3 per cent, which now more than matches the top easy access savings deals, as we detail below.
Premium Bonds boost: An extra £80 million in prizes up for grabs from the January prize draw
The number of £100,000 prizes on offer next month, for example, will rise from 18 to 56.
More than 22 million savers who hold roughly £120 billion in Britain’s favourite savings product stand to benefit, with NS&I expecting to pay out almost £300 million next month.
Premium Bonds don’t pay interest, so the prize fund rate is the average return per year among all savers – though the draw element means many will receive nothing at all, and some will receive far more.
It is NS&I’s third hike to the Premium Bonds prize fund rate this year, with it tripling from 1 per cent in May.
Only as recently as October, the Premium Bond prize fund rate increased to 2.2 per cent from 1.4 per cent, with the odds of scooping a prize changing from 24,500 to one to 24,000 to one.
Given how high savings rates have gone and that the Bank of England base rate is expected to rise from 3 per cent to 3.5 per cent on Thursday, many have been calling on to NS&I to increase its prizes.
Last week, Jeff Prestridge, personal finance editor for the Mail on Sunday, called on NS&I’s boss, Ian Ackerly, to ‘get your finger out and up the Premium Bond prize rate! A rate around the 3 per cent mark would do for starters.’
Jeff’s demand appears to have hit the mark as NS&I have done just that.
|Value of prizes in December 2022||Number of prizes in December 2022||Value of prizes in January 2023 (estimated)||Number of prizes in January 2023 (estimated)|
NS&I has also increased interest rates across several of its other variable savings products.
More than 570,000 customers holding Direct Saver and Income Bonds will benefit from today as the interest rate on both products has been increased from 1.8 per cent to 2.3 per cent.
The rate on the Direct Saver is now at its highest level since the account was launched in March 2010, whilst the interest rate on Income Bonds is the highest it has been since February 2009.
NS&I says the changes will ensure that its products are priced appropriately when compared to the rest of the savings market.
Its Direct Savers and Income Bonds are both easy-access savings deals. There are currently 18 easy-access savings accounts that pay more.
Ian Ackerley, chief executive at NS&I said: ‘The New Year increase to the Premium Bonds prize fund rate will mean that customers will have seen the prize fund rate triple in less than a year.
‘This means a bigger prize pot and more higher value prizes for our customers – a great way to start 2023.
‘The change to the Premium Bonds prize funds rate, as well as the changes to Direct Saver, Income Bonds and Investment Account, will mean that our products are priced appropriately when compared to the rest of the savings market.
‘This will also ensure that we continue to balance the interests of savers, taxpayers and the broader financial services sector.’
Do Premium Bonds now beat easy access savings accounts?
Premium Bonds can be considered akin to easy access savings accounts, as they allow savers to withdraw their money on-demand and without penalty.
However, savers must remember that it does take time to get money out of Premium Bonds – although this is much quicker than it once was – meaning they aren’t truly instant access.
The top easy access accounts in This is Money’s best buy savings tables only just match the new Premium Bonds 3 per cent prize rate.
Yorkshire Building Society’s Rainy Day Saver pays 3 per cent, but this is severely limited as that rate is only paid on the first £5,000 in the account. On balances above that you earn 2.5 per cent and you can only withdraw money on two days a year.
Next in line is Coventry BS’s Limited Access Saver at 2.85 per cent, which allows six penalty-free withdrawals per year.
Arguably, the Premium Bonds rate stacks up well against these, but remember that prizes are not guaranteed and you may do better or worse than that average rate.
Premium Bonds Winners
|Prize||Area||Value of bond|
|£1,000,000||Highlands and Islands||£20,000|
More December 2022 winners