NS&I has announced significant changes to Premium Bonds and other savings products, with the prize fund rate for Premium Bonds set to rise from 3.3% to 3.8% starting from the July draw. The odds of winning for each £1 Bond will improve from 1 in 23,000 to 1 in 22,000. The monthly draw continues to offer substantial prizes, including two £1 million jackpots, as well as prizes of £100,000 and £50,000.
New British Savings Bonds and Green Savings Bond Rates
Alongside the Premium Bonds changes, NS&I has unveiled new issues of its British Savings Bonds with increased rates. The Green Savings Bond has also seen a rate hike. 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. 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.'
The new rates for Guaranteed Growth Bonds and Guaranteed Income Bonds are as follows: 1-year at 4.69% (up from 4.5%), 2-year at 4.67% (up from 4.48%), 3-year at 4.65% for Growth and 4.69% for Income (both up from 4.45%), and 5-year at 4.55% (up from 4.40%). The Green Savings Bonds 3-year rate has increased to 4.45% from 3.82%.
Outlook for Premium Bonds Rate
Sarah Coles, head of personal finance at AJ Bell, commented on the potential for further Premium Bonds rate increases: '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: '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.'
Impact on Bond Holders
While the odds of winning will improve in July, Coles warned that the probability of securing a big prize remains low. '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.'
The July increase follows a reduction in the prize rate from 3.6% to 3.3% in April. NS&I's latest moves aim to balance market conditions and funding targets, with the organisation likely monitoring the success of the current rate hikes before considering further changes to its flagship savings product.
