Boost for savers as Premium Bond prize rate hits 14-year high

Prize pot: National Savings & Investments hiked its prize fund from 1.4% to 2.2 % – meaning millions more are up for grabs

Savers stand a better chance of winning a Premium Bond prize after National Savings & Investments raised its rates to a 14-year high.

The Treasury-backed bank yesterday hiked its prize fund from 1.4 per cent to 2.2 per cent — meaning millions more are up for grabs. It is the latest provider to join the fight for households’ cash after interest rates began edging up in December.

Some 22.4 million savers hold £119.5 billion in Britain’s favourite savings product. NS&I expects to pay out £218 million next month, an extra £79 million on the £139 million total it paid in September. The number of prizes paid will rise by 98,000 to 4,960,308.

The amount of £50 and £100 prizes will increase dramatically to 728,737, up from 38,137 a piece.

The £500 prize number will rise from 8,337 to 13,092, while there will be 4,364 prizes of £1,000, up from 2,779. 

Bigger prizes will also nearly double. We can expect 357 prizes of £5,000, 178 at £10,000, 72 at £25,000, 35 at £50,000 and 18 at £100,000 next month.

But NS&I has slashed the number of £25 prices by more than a million to 3.5 million, down from 4.8 million. 

There is also no change in the jackpot. It remains that two lucky winners will pocket £1 million in the draw each month.

And despite the big increase, the odds of winning a prize have only improved slightly from 24,500 to one to 24,000 to one.

The changes are due to come into effect next month, with the results announced on October 4.

It is the second rise in the Premium Bond fund rate this year. It rose from its lowest level of 1 per cent to 1.4 per cent in June. 

The fund hit rock bottom in 2009, at 1 pc for five months during the financial crisis, but did not see this low level again until December 2020. It stayed there for 18 months with odds of winning just 34,000 to one.

Since the Bank of England base rate started to rise at the end of last year, the prize fund has risen by 1.2 percentage points. Base rate is 2.15 points up to 2.25 per cent.

Ian Ackerley, chief executive at NS&I says: ‘These changes have helped us ensure that premium bonds are attractive.’

Popular: Some 22.4 million savers hold £119.5bn in Premium Bonds, making them Britain¿s favourite savings product

Popular: Some 22.4 million savers hold £119.5bn in Premium Bonds, making them Britain’s favourite savings product 

But Laura Suter, head of personal finance at AJ Bell, cautions: ‘Savers need to be aware that they could win nothing, and so get no return on their money.

‘Most would be better off in an easy-access account.’

Sarah Coles, personal financial analyst at Hargreaves Lansdown adds: ‘By putting your money into Premium Bonds, you’re giving up any interest you might earn elsewhere. 

With high inflation, you’ll be losing far more of the spending power of your savings by leaving them there.’ NS&I’s Direct Saver, the online and telephone easy-access account pays 1.2 per cent. Similar deals elsewhere are nearer 2 per cent.

Some 340,000 savers have nearly £31 billion in this account making it the second most popular with the Government bank.

But the rate has remained the same since July 21 even though the general level of interest rates has risen by 1 percentage point since then.

Income Bonds, popular with pensioners as they pay out income monthly, are also stuck at 1.2 per cent.

Its Direct Isa at 0.9 per cent looks equally poor when the top easy access Isa rate stands at 1.75 per cent from Gatehouse Bank.

NS&I still pays a miserly 0.01 per cent on its postal-based Investment Account in which savers hold £2.7 billion.

But the 345,000 savers with Index-Linked Savings Certificates fare better. They earn inflation, currently 9.9 per cent, plus 0.01 per cent. Those with maturing certificates can reinvest with NS&I.

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How to find the best savings rates

Savings rates have been in the doldrums for many years but the situation was hugely exacerbated by the pandemic and the emergency base rate cut to 0.1 per cent.

But there are ways to ensure your cash is at least in the best of the bunch at all times. 

Checking top rates is essential, but it is also possible to make life easier overall and manage your savings pots in one place. 

Over the past few years a number of savings platforms have launched, offering savers the option to switch as and when better deals become available and manage accounts from different banks and building societies.

They each work slightly differently and include their own exclusives. To check out what’s on offer take a look yourself:

Platforms featured below are independently selected by This is Money’s specialist journalists. If you open an account using links which have an asterisk, This is Money will earn an affiliate commission. We do not allow this to affect our editorial independence. 

> Raisin* 

> Hargreaves Lansdown Active Savings*

> Flagstone  

Or you can view This is Money’s comprehensive best buy savings tables here, independently curated by savings guru Sylvia Morris:

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