Boost for savers as Premium Bond prize rate hits 14-year high
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Prize Pool: National Savings & Investments increased its prize pool from 1.4% to 2.2% – meaning there are still millions up for grabs
Savers are more likely to win a Premium Bond prize after National Savings & Investments raises interest rates to their 14-year high.
The Treasury-backed bank yesterday increased its prize pool from 1.4 percent to 2.2 percent, meaning there are still millions up for grabs. It is the latest provider to join the battle for household cash after interest rates started rising in December.
About 22.4 million savers have £119.5 billion in Britain’s favorite savings product. NS&I expects to pay out £218 million next month, an additional £79 million on the total of £139 million paid in September. The number of prizes paid out increased by 98,000 to 4,960,308.
The amount of £50 and £100 prizes will increase dramatically to 728,737, an increase of 38,137 each.
The £500 prize pool will increase from 8,337 to 13,092, while there will be 4,364 prizes of £1,000, up from 2,779.
Larger prizes will also nearly double. We can expect 357 prizes at £5,000, 178 at £10,000, 72 at £25,000, 35 at £50,000 and 18 at £100,000 next month.
But NS&I has reduced the number of prizes from £25 by more than a million to 3.5 million, from 4.8 million.
There is also no change in the jackpot. It remains that two lucky winners will get £1 million in the draw each month.
And despite the big increase, the odds of winning a prize have only slightly improved from 24,500 to one to 24,000 to one.
The changes will take effect next month and the results will be announced on October 4.
It is the second increase in bond premiums this year. It rose from its lowest level of 1 percent to 1.4 percent in June.
The fund reached a low point in 2009, at 1 pc. for five months during the financial crisis, but did not see this low level again until December 2020. It stayed there for 18 months with a chance of winning just 34,000 to one.
Since the Bank of England’s key interest rate started rising late last year, prize money has risen by 1.2 percentage points. Base rate is 2.15 points to 2.25 percent.
Ian Ackerley, chief executive at NS&I said: ‘These changes have helped us ensure that premium bonds are attractive.’
Popular: Some 22.4 million savers hold £119.5 billion in premium bonds, making them Britain’s favorite savings product
But Laura Suter, head of personal finance at AJ Bell, warns: “Savers need to be aware that they can’t win anything and thus get no return on their money.
“Most would be better off in an easily accessible bill.”
Sarah Coles, personal financial analyst at Hargreaves Lansdown, added: “By putting your money into Premium Bonds, you are giving up all the interest you could earn elsewhere.
At high inflation, you lose much more of the purchasing power of your savings by leaving them there.’ Direct Saver from NS&I, the easily accessible online and telephone account, pays 1.2 percent. Similar deals elsewhere are closer to 2 percent.
About 340,000 savers have nearly £31 billion in this account, making it the second most popular account with the government bank.
But interest rates have remained the same since July 21, even though the general interest rate has risen by 1 percentage point since then.
Income bonds, popular with retirees because they pay out their monthly income, are also stuck at 1.2 percent.
The 0.9 percent Direct Isa looks as bad as Gatehouse Bank’s top Isa rate for easy access is 1.75 percent.
NS&I still pays a stingy 0.01 percent on its postal investment account where savers hold £2.7 billion.
But the 345,000 savers with Index-linked Savings Certificates are doing better. They earn inflation, currently 9.9 percent, plus 0.01 percent. Those with maturing certificates can reinvest with NS&I.
sy.morris@dailymail.co.uk
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How to find the best savings rate
Savings rates have been in the doldrums for many years, but the situation was greatly exacerbated by the pandemic and the emergency rate was cut to 0.1 percent.
But there are ways to make sure your money is at least in the best of the bunch at all times.
Checking top rates is essential, but it’s also possible to make life easier in general and manage your piggy banks in one place.
A number of savings platforms have been launched in recent years, offering savers the ability to switch as better deals become available and manage accounts from various banks and mortgage lenders.
They each work slightly differently and contain their own exclusives. Take a look at the offer for yourself:
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