National Savings & Investments has raised Premium Bond prizes to the highest level in 14 years.
Yesterday, it announced the prize fund on these popular bonds will go up to 3 per cent in next month’s draw. It is also increasing threefold the number of large prizes.
Premium Bonds are the UK’s biggest savings product, with more than 21 million people saving more than £119 billion in them.
Highly prized: Premium Bonds are the UK’s biggest savings product, with more than 21 million people saving over £119bn in them
The Government-backed bank has also raised rates on its easy-access Direct Saver and Income Bonds to pay a competitive market rate.
The rise in Premium Bond payouts means savers can expect £80.6 million extra in prizes in January compared with this month.
However, the odds of winning will not change, staying at 24,000/1.
Instead, National Savings & Investments (NS&I) has raised the number of prizes by 15,750.
But there is a huge cut in the number of £25 prizes with a fall to 2.6 million from 3.5 million in December’s draw.
But the number of larger prizes will treble. There will be 56 prizes of £100,000, up from 18, while the £50,000 prize will see the number of winners go up from 36 to 112.
The total of £25,000 prizes increases from 71 to 223 and the number of £10,000 prizes rises from 178 to 559.
In addition, the number of savers who win the £5,000 payout goes up from 359 to 1,118.
There will be 11,983 £1,000 prizes, up from 4,379, while the number of £500 payouts will soar from 13,137 to 35,949. The £100 and £50 prizes rise from 731,225 to 1.16 million apiece.
The jackpot of £1 million remains the same at two each month.
Despite the average prize rate rising, there are no guarantees you’ll win.
Sarah Coles, senior personal finance analyst at investment platform Hargreaves Lansdown, says: ‘Instead of adding more lower-level prizes, NS&I has gone to town with more life-changing sums.
‘It’s a clever move at a time when we know people are searching for a solution to the financial dead end they’ve found themselves in.
‘We know prize draws become far more tempting at times like this, so Premium Bonds are positioning themselves as the ultimate game of chance — with your money back if you lose.’
Ian Ackerley, chief executive at NS&I, says: ‘The New Year increase to the Premium Bonds prize-fund rate means that customers will have seen the rate triple in less than a year.’
This time last year the prize fund stood at 1 per cent. It has risen three times since then. It went up to 1.4 per cent in June and 2.2 per cent in October and now 3 per cent for the January draw.
The latest increase means it has risen by 2 percentage points — only around two-thirds of the rise in the Bank of England base rate.
Last December, the Bank started raising its base rate in an effort to curb inflation.
Since then, it has risen eight times from 0.1 per cent to 3 per cent — a hike of 2.9 percentage points. It is expected to rise for the ninth time tomorrow at the Bank of England’s meeting — to as much as 3.5 per cent.
The rise in Premium Bond payouts means savers can expect £80.6m extra in prizes in January compared with this month. However, the odds of winning will not change, staying at 24,000/1
The 3 per cent prize rate is the highest since November 2008 when it stood at 2.85 per cent.
The highest rate ever was 7.75 per cent between November 1984 and July 1987 with odds of winning at 11,000/1.
The amount in Premium Bonds has increased to £119.4 billion in the past 12 months as punters hope for that big win.
Despite this, the new money going into NS&I has slowed dramatically — with cash pouring out of its other accounts.
It pulled in just £172 million in October, latest figures show.
It’s a huge drop from the £801 million the previous month and less than one-tenth of the £1.807 billion that flowed into the Government-backed bank in August.
In October, savers put £207 million more into Premium Bonds. But some £35 million came out of its other savings accounts where rates are poor compared with the offerings from banks and building societies.
To address this, NS&I has also increased the rate of two of its popular savings accounts.
More than half a million savers will benefit from rate rises on its Direct Saver and Income Bonds.
Its easy-access Direct Saver rate rose from 1.8 per cent to 2.3 per cent yesterday, its highest rate since its launch in March 2010.
This time last year, it paid a miserly 0.15 per cent.
Income Bonds, popular with pensioners because the interest is paid out monthly, also rose to 2.3 per cent. A year ago, they too paid 0.15 per cent.
The 2.3 per cent rate puts NS&I back in the game of attracting savers.
It places it just behind top payers such as online accounts from Al Rayan at 2.81 per cent and Ford Money at 2.5 per cent.
On postal accounts, it is only just behind the top 2.47 per cent from Kent Reliance.
The easy access Direct Saver is available online or by phone while you can buy Income Bonds online, by phone or by post.
In a further change yesterday, the NS&I postal Investment Account rate has limped up from 0.4 per cent to just 0.6 per cent.
There is no change to the Direct Isa rate which remains at 1.75 per cent.
Nor are there changes to its fixed-rate products, including those that are only on offer to savers who are looking to renew their bonds with NS&I.
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