Yesterday NS&I announced the Premium Bonds prize fund rate will rise to 3.15 percent from February. The increase takes the Premium Bonds prize rate to a 14-year high, and is the second rate increase for savers seen just this year with it rising from 2.1 percent to three percent for the January draw.
As the Bank of England continues to raise interest rates, many savers may be wondering if Premium Bonds are now worth it with the rate increasing.
The “prize rate” is not a guaranteed interest rate, as rather than earning interest each month, savers’ Premium Bonds are entered into a monthly prize draw.
Instead, NS&I uses a prize rate to let customers know, on average, how much money they might get back in a year from their Premium Bonds.
Prizes start from £25 and run all the way up to £1million. Two people have the chance to win £1million each month.
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What are the odds of winning?
Despite the increase to the prize fund rate, the odds of each £1 bond winning a prize will remain fixed at 24,000 to one.
This is because while the number of prizes worth £50 to £100,000 will increase from next month’s draw, the number of £25 prizes will fall.
The number of £50 and £100 prizes will both be increasing by approximately 120,000, while the number of bigger prizes, between £500 and £100,000, will increase by a much smaller amount.
The jackpot prize of £1million will still only be awarded to two bond winners.
Number of Premium Bond prizes in February:
- £1million – two
- £100,000 – 59
- £50,000 – 117
- £25,000 – 236
- £10,000 – 590
- £5,000 – 1,177
- £1,000 – 12,573
- £500 – 37,719
- £100 – 1,280,509
- £50 – 1,280,509
- £25 – 2,376,161
The idea is to entice more people to take out Premium Bonds, according to Hargreaves Lansdown senior personal finance analyst Sarah Coles.
She said: “By hiking the number of £50 and £100 prizes, it ensures that smaller wins still feel significant, and by increasing the number of life-changing prizes, it offers a huge draw when money is tight.
“The higher prize rate has come alongside a rebalancing of the prizes. The number of £25 prizes will actually fall back just over nine percent to 2.376 million, while the number of £50 and £100 prizes are up just over 10 percent to 1.28 million.
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Those who have chosen to have prizes paid to their bank account, or have their prizes reinvested, will be informed whether they have won by email or text message.
Britons are urged to check if they have won anything as there is an estimated £74million left in unclaimed Premium Bond prizes.
Each investment in the bonds must be a minimum of £25, and they can be purchased online, over the phone or by post.
Money to buy bonds can be paid in from another NS&I account.
There are no penalties for people who need to take out cash from the Government-backed scheme.