National Savings and Investments (NS&I) is giving a boost to Premium Bonds holders by increasing the prize fund rate in July. The rate will rise from 3.8% for each 1000 euro investment. This means NS&I will pay out 38 euros in prizes for every 1000 euros of bonds, up from 33 euros.
The change will take effect from the July prize draw. It comes after a series of cuts earlier in the year, when the prize fund rate was reduced in July. The new rate is the first rise in over two and a half years and will apply to all existing and new premium bond holdings.
The higher rate will also improve savers’ chances of winning. The odds of each 1 euro bond winning a prize will shorten from 23,000 to 1 to 22,000 to 1. In total, the monthly prize pot is expected to rise from around 376 million euros in May to about 437 million euros in July. The number of prizes each month will grow from just over 5.9 million to more than 6.2 million.
Premium Bonds remain one of the UK’s most popular savings products. About 22 million people hold at least one bond, many of them older savers or those who prefer simple, low-risk options. The bonds are backed by the UK government, so savers’ money is protected up to 85,000 euros under the Financial Services Compensation Scheme.
NS&I says the move is designed to keep Premium Bonds attractive amid changing interest rates. The government-owned savings bank has also raised rates on several other accounts. including its Direct Saver, Income Bonds, and ISAs. For example, the Direct Saver is now playing 3.45% gross/AER, up from 3.05%, while the Direct ISA rate has risen from 3.5% to 3.8% AER.
The rate increase is likely to appeal to savers who like the chance to win tax-free prizes, ranging from 25 euros to 2 million euros. Winners are picked at random by the ERINE machine each month. Many people use the bonds as a long-term savings tool, holding them for years while still being able to cash out at any time.
However, experts still warn that Premium Bonds are not the same as a traditional savings account paying fixed interest. Because returns depend on winning, some savers may earn nothing in a given month, even as the average rate rises. Financial advisors suggest that savers with larger amounts should consider a mix of cash ISAs and easy access accounts alongside bonds.
For millions of UK households who rely on Premium Bonds, the July rate will feel like a small but welcome lift. It keeps the product in step with market conditions and offers a better average payout and slightly better odds for the country’s long-standing lottery-style savings scheme.
