Premium Bond winners and should you get one of the NS&I accounts?

A lucky holder of Premium Bonds will start the new year a millionaire after winning the top prize with holdings of just £4,625.

The lucky winner, from South Yorkshire, was the first of two winning bond numbers to be drawn after purchasing the winning bond in July last year.

It is the 50th smallest company ever to win, placing it in the top 10 per cent of the smallest company to win the £1 million prize.

The second millionaire, from Wiltshire, won with the maximum holdings of £50,000 after purchasing his winning bond in June 2020.

>> View the full list of Premium Bond winners

In this month’s draw, provider NS&I increased the price increase of the Premium Bonds prize fund from 2.2 per cent to 3 per cent, with an additional £80 million in the prize pool compared to December.

The changes have now seen the prize money triple from 1 per cent to 3 per cent since May, with the odds of each £1 bond issue winning a prize improving from 34,500 to 1 to 24,000 to 1.

The 3 percent prize rate is the highest since November 2008 when it stood at 2.85 percent.

The highest percentage ever was 7.75 percent between November 1984 and July 1987 with a winning odds of 11,000 to 1.

Jill Waters, NS&I’s retail director, said: ‘We are entering the new year well with an increase in the Premium Bonds price fund percentage to 3 per cent – the highest in 14 years.

“This means a bigger prize pool and more higher value prizes for all Premium Bonds customers to win – a great way to kick off 2023.

“This month’s prize draw has a record amount of nearly £300 million in prizes up for grabs.”

Are Premium Bonds better than easily accessible savings?

Premium Bonds are the UK’s largest savings product, with over 21 million people saving over £119 billion in them.

For someone looking to add a little fun to their rainy day savings, Premium Bonds could be the answer.

While most prizes are worth £25, the chances of winning a bigger prize have improved significantly this month. The £1 million jackpot remains at two wins per month.

There are now 56 £100,000 prizes, down from 18, while the number of £50,000 prizes has increased from 36 to 111.

The total of £25,000 prizes increased from 71 to 224 and the number of £10,000 prizes increased from 178 to 559.

In addition, the number of savers winning the £5,000 payout rose from 359 to 1,116.

Premium Bonds can be considered as easily accessible savings accounts as they allow savers to withdraw their money on demand without penalty.

However, savers should remember that it takes time to withdraw money from Premium Bonds – although this is much faster than it once was – meaning they don’t really have instant access.

With a price fund percentage of 3 per cent, savers with a lump sum of between £25 and £50,000 might see Premium Bonds as a good place to leave their money.

Compared to our best buy easily accessible savings chart, the Premium Bonds rate stacks up well, but remember that prices are not guaranteed and account holders can do better or worse than that average rate.

At the moment there is not one standard low-threshold savings interest that fits this. However, there is one cash Isa deal that does.

Virgin Money offers a 3 percent exclusive easy access Isa account for anyone with a Virgin Money checking account.

However, it only allows three withdrawals per calendar year. Once the three withdrawals are made, the rate drops to 0.75 percent.

In terms of non-Isa accounts, Yorkshire Building Society offers a deal paying out 3 per cent on balances up to £5,000, but it only allows two withdrawals a year.

Zopa Bank is the best easily accessible deal with no withdrawal restrictions and pays 2.86 percent.

Another advantage of Premium Bonds is that any prizes awarded are tax free.

Any depositor who uses a standard savings account for their rainy day fund will only earn tax-free interest up to their annual tax-free allowance.

For a base rate taxpayer that limit is £1,000, for a higher rate taxpayer £500, while for a supplementary rate taxpayer there is no tax-free allowance.