NS&I to increase the Premium Bond prize rate to 3% – here's all you need to know

MSE_Chris_O

NS&I will increase its Premium Bond prize-fund rate to 3% from 2.2% for its January 2023 draw and beyond, with an extra £80 million in higher-value prizes up for grabs. The odds of winning will remain the same at 24,000-to-one, but there will more than three times as many prizes between £5,000 and £100,000 available.

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NS&I to increase the Premium Bond prize rate to 3% – here's all you need to know

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southone

From

Paul Lewis

NS&I raises savings rates and premium bond prize fund now 3% and many more bigger prizes - therfore fewer £25 prizes. More later but with £50,000 bonds you can expect £1200 a year ie 2.4% tax free. Direct Saver and Income bonds rise from 1.8% to 2.3%

Albermarle

southone said:

From

Paul Lewis

NS&I raises savings rates and premium bond prize fund now 3% and many more bigger prizes - therfore fewer £25 prizes. More later but with £50,000 bonds you can expect £1200 a year ie 2.4% tax free. Direct Saver and Income bonds rise from 1.8% to 2.3%

Good news but not sure about where the 2.4% figure comes from ?

Maybe it is because there are fewer £25 prizes ( which constitute the vast majority of the prizes)

So maybe what he means is that with £50K in bonds you are pretty much guaranteed a minimum of 2.4%, then plus an increased  chance of winning a bigger prize, compared to now ?

Band7

Here is today's NS&I Press Release

New Year Premium Bonds boost as NS&I increases rates across several products

13 December 2022

Premium Bonds customers are set to get a welcome New Year boost with an extra £80 million in prizes up for grabs from the January prize draw, with an increase to the prize fund rate from 2.20% to 3.00%.

Alongside this, effective from today, NS&I has also increased interest rates across several of its other variable products.

The change to the Premium Bonds prize fund rate is the third upwards change that NS&I has made this year, with the prize fund rate tripling from the 1.00% it was at in May 2022. The changes will see the January 2023 prize fund hit an expected £299,572,750.

The odds will stay fixed at 24,000 to 1, with the changes meaning that customers will have more opportunities each month to win high value prizes, with more than three times as many prizes worth £100,000, £50,000, £25,000, £10,000 and £5,000 available.

More than 570,000 customers holding Direct Saver and Income Bonds will benefit from today as the interest rate on both products increases from 1.80% to 2.30%. The rate on Direct Saver is now at its highest level since the account was launched in March 2010, whilst the interest rate on Income Bonds is the highest it has been since February 2009.

NS&I has also increased the interest rate that it pays on its Investment Account from 0.40% to 0.60%.

The changes will ensure that NS&I’s products are priced appropriately when compared to the rest of the savings market. They also ensure that NS&I continues to balance the interests of savers, taxpayers and the broader financial services sector.

NS&I Chief Executive, Ian Ackerley, said : “The New Year increase to the Premium Bonds prize fund rate will mean that customers will have seen the prize fund rate triple in less than a year. This means a bigger prize pot and more higher value prizes for our customers – a great way to start 2023.

“The change to the Premium Bonds prize funds rate, as well as the changes to Direct Saver, Income Bonds and Investment Account, will mean that our products are priced appropriately when compared to the rest of the savings market. This will also ensure that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”

Current and new Premium Bonds prize fund rate and odds

******* go to the NS&I site to see the table

Number and value of Premium Bonds prizes

******* go to the NS&I site to see the table

Variable rate savings products

Product	Previous interest rate	Interest rate from today (13 December 2022)
Direct Saver	1.80% gross/AER	2.30% gross/AER
Income Bonds	1.80% gross/1.81% AER	2.30% gross/2.32% AER
Investment Account	0.40% gross/AER	0.60% gross/AER

–Ends–

 

Notes to Editors

 

1. NS&I is one of the largest savings organisations in the UK, offering a range of savings and investments to 25 million customers. All products offer 100% capital security as NS&I is backed by HM Treasury.

2. NS&I announced on 27 September 2022 that the Premium Bonds prize fund rate would increase from 1.40% to 2.20%, with the odds changing from 24,500 to 1 to 24,000 to 1. The changes were effective from the October 2022 prize draw and more information can be found here .

3. NS&I announced changes to its variable and fixed rate products (including Direct Saver, Income Bonds and Investment Account) on 25 October 2022. More information on this change can be found here .

4. AER stands for Annual Equivalent Rate and enables the comparison of interest rates from different financial institutions and across different products on a like-for-like basis. It shows what the notional annual rate would be if interest was compounded each time it was credited or paid out. Where interest is credited once a year, the rate quoted and the AER will be the same.

5. Tax-free means the interest is exempt from UK Income Tax and Capital Gains Tax.

6. Information on NS&I’s on sale products can be found here.

7. Information on NS&I’s off sale products can be found here.

8. For further information please contact the NS&I media team.

eskbanker

Albermarle said:

southone said:

From

Paul Lewis

NS&I raises savings rates and premium bond prize fund now 3% and many more bigger prizes - therfore fewer £25 prizes. More later but with £50,000 bonds you can expect £1200 a year ie 2.4% tax free. Direct Saver and Income bonds rise from 1.8% to 2.3%

Good news but not sure about where the 2.4% figure comes from ?

Maybe it is because there are fewer £25 prizes ( which constitute the vast majority of the prizes)

So maybe what he means is that with £50K in bonds you are pretty much guaranteed a minimum of 2.4%, then plus an increased  chance of winning a bigger prize, compared to now ?

They've changed the breakdown to pay more larger prizes, so instead of splitting high/medium/low value prizes as 5/5/90% (by value) it'll be 10/10/80%, thereby taking the likely outcome to about 80% of the headline rate instead of 90% as it has been up to now.

It's not quite as simple as that, in that the number of low value prizes moves from 99.63% of the prizes to 99%, or to put a more positive spin on it, the chances of winning a medium/high one (if winning a prize at all) improve from 0.37% of prizes to 1%!

iishappy

Premium Bond Prize Breakdown Est

Albermarle

eskbanker said:

Albermarle said:

southone said:

From

Paul Lewis

NS&I raises savings rates and premium bond prize fund now 3% and many more bigger prizes - therfore fewer £25 prizes. More later but with £50,000 bonds you can expect £1200 a year ie 2.4% tax free. Direct Saver and Income bonds rise from 1.8% to 2.3%

Good news but not sure about where the 2.4% figure comes from ?

Maybe it is because there are fewer £25 prizes ( which constitute the vast majority of the prizes)

So maybe what he means is that with £50K in bonds you are pretty much guaranteed a minimum of 2.4%, then plus an increased  chance of winning a bigger prize, compared to now ?

They've changed the breakdown to pay more larger prizes, so instead of splitting high/medium/low value prizes as 5/5/90% (by value) it'll be 10/10/80%, thereby taking the likely outcome to about 80% of the headline rate instead of 90% as it has been up to now.

It's not quite as simple as that, in that the number of low value prizes moves from 99.63% of the prizes to 99%, or to put a more positive spin on it, the chances of winning a medium/high one (if winning a prize at all) improve from 0.37% of prizes to 1%!

Yes we used to say in posts that when the rate was 1.4% , it was effectively 1.25% with a very small chance of winning a big(ish) price, and an infinitesimal chance of winning a Million.
So now when the rate is 3%, it is effectively 2.4% for the majority, but with a little bit better chance than before of getting a larger prize, although the chance of winning a Million remains very very remote.

southone

I would be happy with 100K

pecunianonolet

Is there a good source to read about what premium bonds are and their advantages vs. disadvantages and what group of people are attracted by them and why? Been on their website but not much wiser as to me it seems not much different to gambling with the key point of being able to only win, if you actually win. 

As far as my understanding goes you put money in a pot, there is a likelihood you may win money and what you win is tax free. There are no limits on how much you can put in and 100% of what you put in is guaranteed.

eskbanker

pecunianonolet said:

Is there a good source to read about what premium bonds are and their advantages vs. disadvantages and what group of people are attracted by them and why?

https://www.moneysavingexpert.com/savings/premium-bonds/ is a reasonable place to start, although not without its flaws....

pecunianonolet said:

Been on their website but not much wiser as to me it seems not much different to gambling with the key point of being able to only win, if you actually win.

The key difference from gambling is that with premium bonds you get your stake back.

pecunianonolet said:

There are no limits on how much you can put in

The limit is £50K.

Oasis1

Will MSE be updating their PB calculator?