NS&I to boost Premium Bonds prize fund rate – 12 more £100,000 prizes will be up for grabs

NS&I is raising its Premium Bonds prize fund rate from September, taking the total monthly prize pot close to £500 million.

The government-backed savings bank will increase the prize fund rate from 3.80% to 4.35% from the September draw.

NS&I says there will be more than 308,000 extra prizes up for grabs, including 12 additional £100,000 prizes, 27 more £50,000 prizes and an extra 51 £25,000 prizes.

There will also be over 2.3 million £100 prizes in total and the overall monthly pot will rise by £63 million to more than £497 million.

NS&I is also increasing the odds of winning from September, from 22,000 to one to 21,000 to one. The odds were also raised in July.

Caitlyn Eastell, personal finance analyst at data firm Moneyfactscompare, said: “[Premium Bonds] may be particularly appealing to savers who have already used their ISA allowance or are likely to breach their personal savings allowance.

“However, despite the improved odds, they are a game of chance and the 4.35% shouldn’t be mistaken for a headline rate.”

Eastell added: “The best easy access ISAs pay over 4.5% and returns could be even higher if [savers are] willing to lock away their cash.”

Source: NS&I

NS&I boosts rates on savings accounts

In addition to increasing the Premium Bonds prize fund rate and odds of winning, NS&I is also increasing interest rates on 10 savings accounts from today (18 August).

NS&I is boosting rates on its easy-access Direct Saver and Income Bonds savings accounts.

The Direct Saver’s rate is increasing from 3.45% gross/AER to 3.75% gross/AER while the Income Bonds savings account’s rate is rising from 3.4% gross/3.45% AER to 3.69% gross/3.75% AER.

Interest is paid yearly on the Direct Saver. You can hold a minimum of £1 and maximum of £2 million in the account.

Interest is paid monthly on the Income Bonds account. You need a larger £500 to open it and can hold a maximum of £1 million.

NS&I is also hiking rates on its one, two, three and five-year fixed-rate Guaranteed Growth and Guaranteed Income British Savings Bonds.

Rates are increasing by between 0.09 and 0.15 percentage points.

Source: NS&I

Are the savings accounts worth it?

If you like the idea of your money being 100% backed by the Treasury, the Direct Saver and Income Bonds could be more appealing now their rates have increased.

Money in most savings accounts is protected under the Financial Services Compensation Scheme (FSCS) in case your provider collapses, but only up to £120,000.

However, even with your money being backed by the Treasury through the Direct Saver and Income Bonds, you can get more competitive rates via other easy-access accounts on the market currently.

Santander’s Edge Saver account is paying 6% interest, if you open a Santander Edge or Santander Edge Explorer current account. The accounts come with respective monthly fees of £3 and £17.

If you don’t want to pay a monthly current account fee, you could also put your money in a cahoot Sunny Day Saver and get 5% on balances up to £3,000, or the Chase Saver has an interest rate of 4.5% on balances up to £3 million.

NS&I’s changes to their fixed-rate British Savings Bonds have made them best buys, correct at the time of writing.

Based on MoneyWeek analysis of Moneyfacts data, the one, two, three and five-year bonds are all in the top 10 for their respective terms, however, the top rates on the market are currently paying up to 5%.

Sarah Coles, head of personal finance at investment platform AJ Bell, said: “Given that this is the most popular term to fix your savings over, [NS&I is] clearly hoping to persuade rate-chasers to make a small compromise in order to secure a rate that’s 100% backed by the Treasury.

“There are better deals on offer elsewhere – especially if you are fixing for longer – so if the rate is the most important thing to you, you can find a more rewarding home for your money.

“However, getting so close to the most competitive deals could be enough to tempt some savers into the NS&I fold.”