Premium Bonds prizes raised by NS&I – but how do they compare with the best savings accounts?
National Savings and Investments (NS&I) has recently increased its rates on Premium Bonds and savings products but these are still below the best-paying ISAs and other savings accounts.
The Premium Bond award rate will be 3.8 percent from July, after falling from 3.6 percent to 3.3 percent in April.
The odds of winning are also better; It fell from 23,000 to one for every bond held, to 22,000 to one.
So there should be an extra 322,000 prizes from the £60 million jackpot.
While the moves have been welcomed by monetary experts, they note that NS&I is still well below its rivals when it comes to savers’ cash returns.
Sarah Coles, head of personal finance at AJ Bell, said: “It’s getting a bit embarrassing for NS&I to fall so far behind the more competitive accounts in the easy-access market. Cuts in April meant Premium Bonds paid a reward rate of just 3.3 per cent, where easy-access savers could hold onto more than ten accounts without withdrawal restrictions paying over 4 per cent.”
NS&I customers will also see an increase in the variable interest rate on savings they hold in a Direct Saver (3.45 per cent), Income Bond (3.45 per cent), Direct ISA (3.8 per cent) and Junior ISA (3.7 per cent).
The best deals on the market still pay 4.5 percent, well above that level; Some regular savers and fixed-term deals pay even higher rates.
NS&I Retail Director Andrew Westhead said: “We regularly review our products to ensure they reflect current market conditions and we are pleased to be able to improve rates on five variable savings accounts today. This reflects changes in the wider savings market and helps us achieve our Net Funding target.”
Premium Bonds have been around since 1956 – people can be worth up to £50,000 and every £1 worth of bonds is entered into a draw where prizes range from £25 to £1 million.
Get a free partial share of up to £100.
Capital is at risk.
Terms and conditions apply.
ADVERTISING
Get a free partial share of up to £100.
Capital is at risk.
Terms and conditions apply.
ADVERTISING
Rachel Springall of moneyfactscompare.co.uk says: “Savers who choose to keep their potency with NS&I will be pleased to see rates rise, although it’s worth noting that the top rates in the market are over 4 per cent on easy-access accounts, with some top-end fixed accounts paying over 4.50 per cent. “However, there’s no denying that some savers will forgo higher rates to put their money into the brand because it’s 100 per cent owned by the brand.” Supported by HM Undersecretariat of Treasury.”
The savings market is currently in a state of flux. The expectation since the start of the Iran war was that Bank of England interest rates might have to rise; This meant savers had to get better interest rates and borrowers had to get more expensive mortgages.
The market expects two or three interest rate hikes this year.
AJ Bell’s Ms Coles adds: “There will always be people attracted to Premium Bonds because the chances of winning a life-changing amount of money are slim to none, and for them the increased reward rate is a nice thing to have on a product they’ve already committed to. However, if you put that money away for the long term, you need to bear in mind that someone with average luck in an average month would still win nothing, so there’s a real risk of your money losing its spending power after inflation.”
A recent Freedom of Information request revealed that less than 1 per cent of Premium Bond prizes go to those with less than £1,000.
Greig Bingham, of independent financial services consultancy Broadstone, says:: “There is also a notable change in the structure of prizes. While the total number of prizes has increased significantly, the proportion of £25 prizes (the smallest amount available) has fallen from 47 per cent to 37 per cent of all prizes. This means a larger proportion of the prize fund is being directed towards higher value prizes, which can make the product more rewarding for savers lucky enough to win.”
In March NS&I admitted it owed hundreds of millions of pounds in compensation to savers over administrator errors in 37,000 accounts.
