NS&I has announced a series of changes to its savings products, including a significant boost to the Premium Bonds prize fund rate and improved odds of winning, alongside rate increases for British Savings Bonds and Green Savings Bonds.
Premium Bonds prize rate and odds increase
From the July draw, the Premium Bonds prize fund rate will rise from 3.3% to 3.8%, a previously announced increase. The odds of each £1 Bond winning a prize will improve from 1 in 23,000 to 1 in 22,000. The monthly draw continues to offer two £1 million jackpots, along with other large prizes including £100,000 and £50,000.
British Savings Bonds and Green Savings Bonds rate changes
On June 23, NS&I introduced new issues of its British Savings Bonds with higher rates, and also increased the rate on its Green Savings Bond. Andrew Westhead, NS&I retail director, said: "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. Our fixed-rate bonds offer savers the choice of different term lengths with the certainty of knowing the interest rate they will receive over the full term, alongside the reassurance that all money invested with NS&I is 100 per cent secure, backed by HM Treasury."
Expert analysis on future Premium Bonds rate moves
The rate increases on other products have led to speculation about whether the Premium Bonds prize rate could see further boosts. Sarah Coles, head of personal finance at AJ Bell, commented: "This change will inevitably raise the question of whether it means the Premium Bond prize rate is set for a boost too. The good news is that it's already set to rise in July – which was announced last month. The bad news is that NS&I might decide this is enough to retain its customers at a time when the next interest rate movement is expected to be downwards."
Coles added that the July increase follows a cut from 3.6% to 3.3% in April. She noted: "The current prize rate is 3.3 per cent and is set to rise to 3.8 per cent in July. This is quite a notable jump, so we wouldn't usually expect another significant move soon, unless there are some big shifts in the broader market. On balance it seems likely that the next move might be downwards given the forecast for interest rates, but it's impossible to be sure given the uncertainty in the wider world right now."
Odds and actual returns
Regarding the odds, Coles explained: "The odds will move from 23,000 to one to 22,000 to one in July, but in the past the odds haven't always changed when the prize rate changes. NS&I is able to keep the odds steady by changing the mix of different prizes." She reminded holders that even with changes, the chance of winning a big prize remains slim: "Of course, these things are both very different to the return you’ll actually receive. In an average month, the average Bond holder 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. It means it's worth thinking carefully whether these Bonds are the right home for your money."
New interest rates for NS&I bonds
The following are the new rates for NS&I's fixed-term bonds, effective from June 23:
- Guaranteed Growth Bonds 1-year: 4.69% (up from 4.5%)
- Guaranteed Income Bonds 1-year: 4.69% (up from 4.5%)
- Guaranteed Growth Bonds 2-year: 4.67% (up from 4.48%)
- Guaranteed Income Bonds 2-year: 4.67% (up from 4.48%)
- Guaranteed Growth Bonds 3-year: 4.65% (up from 4.45%)
- Guaranteed Income Bonds 3-year: 4.69% (up from 4.45%)
- Guaranteed Growth Bonds 5-year: 4.55% (up from 4.40%)
- Guaranteed Income Bonds 5-year: 4.55% (up from 4.40%)
- Green Savings Bonds 3-year: 4.45% (up from 3.82%)
