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Last week, NS&I confirmed it would be increasing the prize fund rate of Premium Bonds next month. On top of this, the financial institution announced it would be raising interest rates for its other savings accounts.
With this move, Premium Bonds holders will be wondering if their odds of taking home the £1million prize have improved.
What are Premium Bonds?
Unlike the majority of savings accounts from high street banks, Premium Bonds do not pay interest to customers in the traditional way.
All bond holders are automatically enrolled into a monthly prize draw where they have the opportunity to win a £1million jackpot prize.
There are other cash prizes up for grabs, including £100,000, £50,000 or £25,000, with the smallest prize being £25.
Two winners take home the £1million prize at the beginning of every month, with the good news announced by NS&I. The next announcement is expected on January 3, 2023.
How much is the rate increase?
For next month’s draw, the savings product’s prize fund rate is being raised to 3.30 percent, up from 3.15 percent.
As a result, bond holders will have the opportunity to win up to £15million extra in cash prizes.
Furthermore, NS&I also announced the interest rates for its Direct Saver and Income Bonds products have been raised from 2.60 percent to 2.85 percent.
Following the financial institution’s decision, this represents the fifth increase to the prize fund rate for Premium Bonds in the last year.
Despite this change, the odds of each £1 Bond winning a prize will continue to be at 24,000 to one.
It should be noted that this rate increase means that the number of prizes worth £50 to £100,000 will go up from the March draw.
Over the last six months, the number of £50 and £100 prizes will have multiplied by almost 37 to more than 1.4 million for each amount.
At the same time, the number of £25 prizes provided by NS&I will have more than halved to just over two million.
Sarah Coles, the head of personal finance at Hargreaves Lansdown, shared why the interest rates for NS&I’s savings account “aren’t a million miles from the best on the market” at the moment.
The savings expert highlighted that Premium Bonds and NS&I’s other offerings are “attractive” to those who seek security.
She explained: “The whole easy access market has been edging up for more than a year and at 2.85 percent the rates on the Direct Saver and Income Bonds start to become contenders.
“There will be plenty of rate chasers for whom this isn’t good enough when they can make more than three percent elsewhere, but these accounts aren’t a million miles from the best on the market.
“At this rate, these accounts are particularly attractive for people who are looking for the level of comfort provided by the 100 percent Treasury guarantee. They’re also a winner for those with particularly humongous sums to save.
“They can put up to £2million into a Direct Saver and £1million into the Income Bonds, and it’s all protected by the Treasury if something goes wrong.”
Interest rates have recently received a boost following the Bank of England’s decision to hike the base rate, which currently sits at four percent.
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