Premium Bond win is now 40pc more likely

‘Prize rate’ now ahead of the best-paying easy access savings accounts after NS&I shortens the odds

THE chance of winning a Premium Bond prize has increased by 40 per cent after National Savings & Investments shortened the odds for the first time in nearly five years.

From next month each £1 bond will have a 24,500/1 chance of winning a prize, up from 34,500/1. This takes the bond’s “prize rate” – its effective interest rate – from 1 per cent to 1.4 per cent, putting it ahead of the best-paying easyaccess accounts available. It has been nine years since NS&I’S electronic random number indicator equipment – Ernie – offered a higher interest rate.

The increase means an estimated 1.4 million additional prizes will be paid out in the June Premium Bonds prize draw, NS&I said, a 40 per cent increase.

Ian Ackerley, chief executive of NS&I, said the new rate would ensure the bonds were “priced appropriately” when compared to the interest rates offered by other savings providers.

The average easy-access savings account pays 0.39 per cent, according to analyst Moneyfacts. Chase, a digital bank, offers an easy-access account that pays 1.5 per cent, but it can be opened only by people who hold a current account with the bank.

The best savings account without such a restriction, from Al Rayan Bank, pays 1.31 per cent. The Premium Bond prize rate had remained untouched since December 2020, when it was cut from 1.4 per cent to 1 per cent, despite four base rate rises since.

It is the first time NS&I has shortened the odds since December 2017, when the prize rate climbed from 1.15 per cent to 1.4 per cent. It is also the first time NS&I has raised the prize rate since the Bank of England started to increase interest rates in December.

However, NS&I’S 0.4 percentage point rise still lags behind the 0.75 percentage point rise in the Bank of England base rate.

Sarah Coles, of Hargreaves Lansdown, a financial services company, said: “Despite falling well behind competitive savings accounts, Premium Bonds were still attracting plenty of cash. Between the April and May draw, the number rose by over 655million, which means £655million more for NS&I coffers. It was only right that rates rose to reflect market movements elsewhere.”

The overall odds of winning have improved, but the chances of winning the biggest prizes have not. Two million pound prizes remain to be won each month. In May, the chances of winning £1million with a single bond were one in 58.91billion.

Laura Suter, of stockbroker AJ Bell, said savers with a gambling spirit would be attracted to the shortened odds of Premium Bonds, but warned that investors could get no return at all on their money. “If the still relatively-low savings rates don’t excite you, you can gamble on the chances of winning one of the top Premium Bond prizes – after all, someone has to win it,” she said.

“However, anyone in this camp needs to be aware that they could … get no return on their money.”

Ms Suter said investors who wanted a guaranteed return could buy one of the many fixed-rate bonds on offer, with rates for a one-year fixed-rate accounts above 2 per cent.

One-year fixed rate cash Isa rates also provided higher returns, she added.

Although NS&I has increased the chances of winning with Premium Bonds, the rates on its other accounts will not rise as the Government-backed savings institution increased rates on its easy-access Direct Saver accounts and Income Bonds by 0.2 percentage points in December, from 0.15 to 0.35 per cent.