NS&I has boosted its prize pot for Premium Bonds to a record £329m, upping its “prize rate” for millions of savers.
There will be an extra £15m up for grabs in next month’s draw, increasing the effective interest rate on the savings bonds from 3.15pc to 3.3pc, its highest level since May 2008.
The odds of each £1 bond winning a prize will remain at 24,000 to 1, but the Government-backed savings institution said that it would increase the number of prizes worth £50 to £100,000 from the March draw.
Ian Ackerley, of NS&I, said the changes continued to “balance the interest of savers, taxpayers and the broader financial services sector.”
He said: “Premium Bonds are one of the nation’s most loved ways to save, giving people the monthly anticipation of a potential win while knowing their money is 100pc safe.”
Deposits saved in all NS&I accounts are guaranteed by the Government in the case of financial collapse, unlike at commercial providers where typically only deposits of up to £85,000 are protected.
Anna Bowes, of the analyst Savings Champion, said: “This is good news as Premium Bonds are an incredibly popular way to save. People who have drifted away may be tempted back by the chance to win a bigger prize.
“Premium Bonds remain a competitive option, especially for higher rate taxpayers as it represents a good way to shelter up to £50,000. Any prizes won are tax free.”
However, Ms Bowes added it was important to distinguish between the NS&I prize rate and guaranteed interest rates found in traditional saving accounts.
There is no guarantee Premium Bond holders will win any prizes and the chances of winning are stacked in favour of those with the most bonds.
“Premium Bonds may not be appropriate if you need your cash to grow. Saving rates are improving fast, and you could earn a significant amount of guaranteed interest elsewhere,” she said.
Savers willing to lock away their cash for one year could earn a rate of more than 4pc on their cash. Ms Bowes said: “The best one-year bond pays an annual rate of 4.17pc. That means £50,000 would earn £2,085 a year. If you put that cash into Premium Bonds, you would have to win prizes worth £174 on average each month just to match that.”
NS&I has also increased rates for its “Direct Saver” and “Income Bonds” accounts to 2.85pc, from 2.6pc.
However, they remain below central interest rates set by the Bank of England, which increased to 4pc in February.
