National Savings & Investments (NS&I) has increased its prize fund rate for Premium Bonds.
The rate is going up from 3% to 3.15% for its February 2023 draw and more higher value prizes could be won.
This is the second rate increase NS&I savers has since already this year with it rising from 2.1% to 3% for the January draw.
It is also the fourth change to the Premium Bonds prize fund rate the NS&I has made in the last year, meaning that the prize fund rate is at its highest level in over 14 years.
This change has not made a difference to the chance of winning as the odds of each £1 Bond winning a prize will remain fixed at 24,000 to one.
However, the changes do mean that the number of prizes given out worth £50 all the way to £100,000 will increase for next month's draw.
The number of £50 and £100 prizes will both be increasing by approximately 120,000, while the number of bigger prizes, between £500 and £100,000, will increase by a much smaller amount.
The jackpot prize of £1million will still only be awarded to two bond winners.
Number of Premium Bond prizes in February:
- £1million - 2
- £100,000 - 59
- £50,000 - 117
- £25,000 - 236
- £10,000 - 590
- £5,000 - 1,177
- £1,000 - 12,573
- £500 - 37,719
- £100 - 1,280,509
- £50 - 1,280,509
- £25 - 2,376,161
Premium Bonds are a savings product, which is backed by the HM Treasury, but are different to traditional savings accounts as they do not offer interest, instead, they offer the chance to win monthly tax-free cash prizes.
The closest thing Premium Bonds have to an interest rate is their annual prize rate, which as of next month will be £3.15, and this represents the average return you will get for your money.
So, for every £100 invested in Premium Bonds, £3.15 is paid out every year in prizes, however, there is no guarantee you will win anything at all.
Many turned to Premium Bonds as rock bottom interest rates elsewhere over the last few years meant they had little to lose and the potential of millions to gain.
With Premium Bonds, the main draw is there is no risk for someone to lose their money, they may not win a payout each month, but they won’t lose money either.
However, the worst-case scenario is the money that has been invested remains the same and the value can be affected by rising inflation.
The cons of Premium Bonds stem from this, as with no interest people won’t see a return on their investment unless they win and winning a Premium Bond prize, even with the change, is still very low.
As Premium Bonds have a low average rate of return, people are more likely to earn more with a high street bank's fixed-rate savings account.
