Premium Bonds holders may want to review their savings arrangements after National Savings and Investments confirmed a series of account changes affecting both Premium Bonds and other popular savings products. The update comes as adjustments to prize rates and interest rates begin to take effect, starting with the July Premium Bonds draw.
NS&I says the changes reflect current market conditions and form part of its regular review of savings products. While the headline focus is on Premium Bonds, the organisation has also announced higher rates across several fixed-term savings options.
Update
From the July draw, NS&I will increase the Premium Bonds prize fund rate from 3.3 percent to 3.8 percent. At the same time, the odds of each £1 Bond winning a prize will improve from one in 23,000 to one in 22,000.
Premium Bonds do not pay interest. Instead, holders are entered into a monthly prize draw, with tax-free prizes ranging from £25 to £1 million. Two £1 million prizes are awarded every month.
The July increase follows a reduction earlier this year, when the prize rate was cut from 3.6 percent to 3.3 percent for the April draw.
Context
The prize fund increase is notable given recent volatility in savings rates. According to Sarah Coles, head of personal finance at AJ Bell, the move raises questions about whether further increases could follow.
She noted that while the July rise has already been confirmed, NS&I may view this as sufficient to retain customers, particularly as expectations grow that broader interest rates may begin to fall later this year.
Coles added that such a jump would not usually be followed quickly by another significant move unless wider market conditions changed sharply.
Odds
Alongside the higher prize fund rate, the improved odds mean that Bond holders are slightly more likely to win something in each monthly draw. However, NS&I can adjust the mix of prizes to manage changes, meaning odds and prize rates do not always move together.
Coles cautioned that despite these adjustments, the likelihood of winning a large prize remains low. In a typical month, most Bond holders will not win anything. As Premium Bonds pay no guaranteed interest, there is a risk that returns may not keep pace with inflation unless a holder is particularly lucky.
Rates
At the same time, NS&I has announced higher rates for several of its fixed-term savings products, including new issues of British Savings Bonds and an increased rate for its Green Savings Bond.
Andrew Westhead, NS&I’s retail director, said the changes were designed to reflect current market conditions and provide savers with certainty over returns. All savings held with NS&I remain fully backed by HM Treasury.
The updated rates are shown below:
| Product | New Rate | Previous Rate |
|---|---|---|
| Guaranteed Growth Bond 1-year | 4.69% | 4.50% |
| Guaranteed Income Bond 1-year | 4.69% | 4.50% |
| Guaranteed Growth Bond 2-year | 4.67% | 4.48% |
| Guaranteed Income Bond 2-year | 4.67% | 4.48% |
| Guaranteed Growth Bond 3-year | 4.65% | 4.45% |
| Guaranteed Income Bond 3-year | 4.69% | 4.45% |
| Guaranteed Growth Bond 5-year | 4.55% | 4.40% |
| Guaranteed Income Bond 5-year | 4.55% | 4.40% |
| Green Savings Bond 3-year | 4.45% | 3.82% |
Outlook
Whether Premium Bonds will see another increase later in the year remains uncertain. Coles said NS&I will be watching how successful the latest changes are in meeting its funding targets before making further adjustments.
Given forecasts suggesting interest rates may trend downward, she said the next move in the Premium Bonds prize rate could just as easily be a reduction rather than another increase.
Review
For savers, the latest changes highlight the importance of reviewing where cash is held. Premium Bonds continue to appeal to those attracted by tax-free prizes and government backing, but they may not suit everyone, particularly those seeking predictable returns.
With higher fixed rates now available across other NS&I products, some Bond holders may wish to compare options and consider whether their savings remain in the right place.
FAQs
When does the Premium Bonds prize rate increase?
The higher prize fund rate applies from the July draw.
What is the new Premium Bonds prize rate?
It will rise from 3.3 percent to 3.8 percent.
Do Premium Bonds pay interest?
No, returns come only from monthly prize draws.
Are NS&I savings fully protected?
Yes, all NS&I savings are backed by HM Treasury.
