Premium Bond savers are set for even better payouts after National Savings & Investments (NS&I) raised its prize fund to 3.3 per cent starting from its draw next month.
The change to the Premium Bonds prize fund rate is the fifth increase that NS&I has made in the last year and the third rise in 2023 alone.
NS&I increased the rate from 2.2 to 3 per cent on 1 January, and this month the prize fund rate rose again to 3.15 per cent for draws made in February.
Savings lottery: Premium Bonds offer an average prize fund rate of return that has now risen to 3.3% – a level that beats most easy access savings deals.
At its current rate of 3.3 per cent, the odds of each £1 Bond winning a prize will remain at 24,000 to 1, but the changes mean that the number of prizes worth £50 to £100,000 will increase from the March draw.
For example, there will now be 62 prizes worth £100k, up from 59 this month and the number of £50,000 prizes will rise from 117 to 123 in March.
The Premium Bond prize fund rate now beats all but one easy access savings account, Yorkshire Building Society’s Rainy Day Saver account at 3.35 per cent.
But the YBS account comes with severe restrictions, including only paying that rate up to £5,000 and allowing withdrawals only two days a year – on the anniversary of opening it or the day of closure.
In a further Valentine’s Day boost for people’s savings pots, NS&I also annunced hikes for Direct Saver and Income Bonds customers.
From today, they will see their interest rates increase to 2.85 per cent, up from 2.6 per cent.
Ian Ackerley, chief executive at NS&I said: ‘Premium Bonds are one of the nation’s most loved ways to save, giving people the monthly anticipation of a potential win while knowing their money is 100 per cent safe.
‘We’re also giving a Valentine’s Day boost to our Direct Saver and Income Bonds customers who will see their interest rates rise from today.
‘We are committed to ensuring our products remain attractive and our customers can continue to save with confidence.
‘Today’s changes mean that we continue to balance the interests of savers, taxpayers and the broader financial services sector.’
Premium Bonds Winners
| Prize | Area | Value of bond |
| £1,000,000 | Sefton | £5,000 |
| £1,000,000 | Sheffield | £2,000 |
| £100,000 | Lancashire | £30,000 |
| £100,000 | West Midlands | £5,000 |
| £100,000 | Staffordshire | £36,825 |
| £100,000 | South Gloucestershire | £14,000 |
| £100,000 | Essex | £39,000 |
| £100,000 | East Riding of Yorkshire | £49,750 |
More February 2023 winners
View list of February 2023 winners
Are Premium Bonds the best place for easy access savings?
The average rate of return on Premium Bonds has seriously improved over the past year. At the start of 2022, they paid just 1 per cent, that climbed to 1.4 per cent in June and then 2.2 per cent in October, followed by 3 per cent this month.
Compare that to the top easy access deals in This is Money’s best savings rate tables and you can see why Premium Bonds are looking attractive.
So, the Premium Bonds rate of return beats the best no strings attached easy access savings deal and comes within a whisker of the top one.
But there are two questions you need to ask: Are Premium Bonds easy access and how likely am I to get that average rate of return?
Premium Bonds come as close as you can get without being genuinely instant access. As our response to a recent reader question explained, it can take a couple of days to get your money out of Premium Bonds.
Instant access savings accounts are the ideal home for your rainy day money, which you may need to get an quickly if an emergency hits. However, many of us could get through a couple of days before we got our hands on our savings.
Ultimately, it’s up to you and your circumstances as to whether Premium Bonds pass the test.
The next question is more complicated: will you get the average rate of return? That depends on luck, of course, and in a lucky year you may do much better than the quoted 3.30 per cent, whereas in an unlucky year you could do much worse.
However, there is another point to note here and that requires a school maths recap: the Premium Bond prize fund rate is a mean average, reflecting the total amount paid out in prizes to everyone compared to the amount held across all bonds.
The problem with this, as with any mean average, is that it can be skewed by the big and small numbers at either end or any uneven numbers. As Premium Bonds pay out a selection of different sized prizes ranging from £25 to £1,000,000, any given individual won’t get the mean average return.
You can read more from the This is Money editor here: Simon Lambert: Premium Bonds may now be the best place for rainy day savings
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