£39m payout boost for Premium Bonds as NS&I’s prize fund rate hits 15-year-high

Millions of Premium Bond holders are set for a payout boost after National Savings & Investments upped prize fund rates to a 15-year high.

The state-owned savings bank said the tax-free prize fund for next month’s draw will increase from 3.3 percent to 3.7 percent.

NS&I said: “The changes will see an additional £39million in prizes available for bondholders.”

With Premium Bonds, there is no interest earned on the money invested. Instead the interest rate funds the draw for prizes.

NS&I on Tuesday said there will be more chances for bondholders to win prizes of between £50 and £100,000, but the number of £25 winners is estimated to slump from more than 2.1 million to 1.5 million.

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The move comes with increased savings rates across the market – one flipside to the series of Bank of England rate hikes which have hit many borrowers hard. NS&I said changes were to ensure products “are priced appropriately when compared to the rest of the ­savings market”.

The Government has also given NS&I the task of raising £7.5billion this financial year. Around 22.4 million people own Premium Bonds.

Dax Harkins, NS&I chief executive, said: “This is now the sixth prize fund rate increase for Premium Bonds in just over a year, making it the highest it’s been in over 15 years. With the changes, we’re expecting to pay out more than £374million to winners in July with more higher-value prizes, meaning that, each month, more lives will be changed by Premium Bonds.”

NS&I estimates there will be 71 prizes of £100,000 each in July’s draw, compared with 63 this month, plus 141 £50,000 payouts – 16 more.

There should be more going all the way down the prize tiers, apart from the lower £25 level.

NS&I has also increased the interest rate for young savers holding its junior ISA from 3.4 percent to 3.65 percent, helping more than 89,000 under-18s.

Myron Jobson, of Interactive Investor, urged savers to consider easy-access accounts, where some rates have risen to 4 percent.