NS&I has announced key changes to its Premium Bonds, including an increase in the prize fund rate from 3.3% to 3.8% starting in July 2026. The odds of winning also improve from one in 23,000 to one in 22,000 per £1 Bond. However, experts caution that the average bondholder may still see no return and face a real risk of losing value after inflation.
Prize Rate Increase and Improved Odds
The prize fund rate for Premium Bonds rises to 3.8% from July, following a previous cut from 3.6% to 3.3% in April. The monthly draw offers prizes ranging from £50,000 to two £1 million jackpots. Sarah Coles, head of personal finance at AJ Bell, described the rate increase as "quite a notable jump," but noted that further significant moves are unlikely unless the broader market shifts dramatically. She added that the next move might be downwards given interest rate forecasts.
New Fixed-Rate Bond Issues
NS&I also launched new issues of British Savings Bonds with improved rates. The Guaranteed Growth and Income Bonds now offer 4.69% for one-year terms (up from 4.5%), 4.67% for two years (up from 4.48%), 4.65% for three years (up from 4.45%), and 4.55% for five years (up from 4.40%). The Green Savings Bond three-year rate increased to 4.45% from 3.82%. Andrew Westhead, NS&I retail director, stated: "We regularly review our products to ensure they reflect current market conditions, and today's increases respond to changes in the fixed-term savings market."
Expert Warning on Inflation Risk
Despite the rate improvements, Coles warned that Premium Bond holders face a "real risk" of losing money after inflation. "In an average month, the average bondholder will still win nothing. And because there's no interest on these accounts, unless you are unusually lucky, there's a real risk you will lose money after inflation," she said. She advised savers to consider whether Premium Bonds are the right home for their money, especially given the uncertainty in interest rate trends.
Future Rate Moves Uncertain
Coles noted that while the prize rate is set to rise in July, NS&I may decide this is sufficient to retain customers, particularly as the next interest rate movement is expected downwards. She added: "It will still need to hit its funding targets, but is likely to have an eye on how successful this round of hikes is before it considers another rise for its flagship savings product." The odds of winning could also change independently of the prize rate, as NS&I can adjust the mix of prizes.
