NS&I to increase the Premium Bond prize rate to 3.15% – here's all you need to know

MSE_Chris_O

NS&I will increase its Premium Bond prize-fund rate to 3.15% from 3% for its February 2023 draw and beyond, with an extra £15 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 prizes between £50 and £100,000 available.

Read the full story here:

NS&I to increase the Premium Bond prize rate to 3.15% – here's all you need to know

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S_uk

Existing thread here:

https://forums.moneysavingexpert.com/discussion/6419707/ns-i-increases-premium-bond-prize-rate-to-3-15

diystarter7

Hi

Thnaks OP, appreciated
From the OP's link:

NS&I to increase the Premium Bond prize rate to 3.15% – here's all you need to know

ually get a return of 3.15%, even with the maximum £50,000 invested. The reason behind this is quite complex – see our Premium Bonds guide for a full explanation.

Plus, the rate is still lower than the top short-term fixed rates – the top six- and nine-month fixes currently pay 3.5% and 3.75% respectively, while the top one- and two-year fixes pay a higher 4.33% and 4.45% respectively. See our Top savings guide for more.

The number of prizes will rise but your odds of winning are still relatively low

Premium Bonds are essentially a savings account you can put money into, where instead of being paid interest, tax-free prizes are awarded in a monthly draw. Prizes range from £25 to £1 million.

The nearest thing Premium Bonds have to an interest rate is their annual prize rate, which is what's increasing from 3% to 3.15%. It's a benchmark of the "average" return you'll get for your money – though in reality, there's no guarantee you'll win anything at all.

What it really means is that for every £100 invested in Premium Bonds, £3 (soon to be £3.15) is paid out every year in prizes. But as the prizes include two £1 million pay-outs and other big prizes, many also win far less – even with the rate increasing.

Below is a breakdown of how the number of prizes awarded is estimated to change from February 2023:

Number of Premium Bond prizes 

Value of prize	Number of prizes in January 2023	Number of prizes (estimated) in February 2023
£1,000,000	2	2
£100,000	56	59
£50,000	111	117
£25,000	224	236
£10,000	559	590
£5,000	1,116	1,177
£1,000	11,968	12,573
£500	35,904	37,719
£100	1,159,432	1,280,509
£50	1,159,432	1,280,509
£25	2,617,902	2,376,161
Total:	4,986,706	4,989,652 Thanks

eskbanker

MSE said:

The number of prizes will rise but your odds of winning are still relatively low

This isn't really true on a like-for-like basis - the increase from 3% to 3.15% is driven by more higher value prizes, but, as covered elsewhere within the article, the odds of any bond winning a prize remain constant at 24,000 to 1, i.e. the total number of prizes remains the same relative to the number of bonds - it's true that there is a tiny 0.06% increase of about 3,000 prizes out of nearly 5 million, but that'll be due to the routine minor increase of bonds in circulation from January to February, rather than the 5% increase in prize fund.

Albermarle

So I will guess that with the overall rate rising to 3.15%, we can say that someone with the maximum £50K should realistically get a return around 2.7/2.8% + a tiny, tiny chance of winning a Million ?

eskbanker

Albermarle said:

So I will guess that with the overall rate rising to 3.15%, we can say that someone with the maximum £50K should realistically get a return around 2.7/2.8% + a tiny, tiny chance of winning a Million ?

99% of the prizes (by volume) account for 80% of the prize fund (by value), both before and after this change, so the 'average luck' expected return will remain at about 80% of the headline rate, i.e. just over 2.5%.

Band7

eskbanker said:

Albermarle said:

So I will guess that with the overall rate rising to 3.15%, we can say that someone with the maximum £50K should realistically get a return around 2.7/2.8% + a tiny, tiny chance of winning a Million ?

99% of the prizes (by volume) account for 80% of the prize fund (by value), both before and after this change, so the 'average luck' expected return will remain at about 80% of the headline rate, i.e. just over 2.5%.

2.5%, if actually achieved, is still a great rate for easy access cash deposits for a higher rate taxpayer who has busted their PSA, as it equates to a tax-exempt 4.17% AER - way above what they can get in any other easy access account (barring a couple of regular savers, perhaps, for small amounts of money). It is more attractive still for additional rate payers as they don't have any PSA, and are paying 45% tax on their taxable interest.

Richard1212

Personally, I have avoided Premium Bonds all my life. They are no different to Camelot's National Lottery. Blimey, there's a really good chance of winning at online poker tables or picking the winner of the 3.30 at Ascot at odds of 10/1.

BooJewels

Richard1212 said:

Personally, I have avoided Premium Bonds all my life. They are no different to Camelot's National Lottery. Blimey, there's a really good chance of winning at online poker tables or picking the winner of the 3.30 at Ascot at odds of 10/1.

They are different, in that you don't actually lose your stake - it's still there to withdraw again at any time.  Plus the winnings are tax free, which is a big draw for some savers, as @Band7 just outlined.

eskbanker

Richard1212 said:

Personally, I have avoided Premium Bonds all my life. They are no different to Camelot's National Lottery. Blimey, there's a really good chance of winning at online poker tables or picking the winner of the 3.30 at Ascot at odds of 10/1.

If you're incapable of spotting the differences between premium bonds and the lottery/poker/horses then probably best to stick to what you can understand!

Richard1212

BooJewels said:

Richard1212 said:

Personally, I have avoided Premium Bonds all my life. They are no different to Camelot's National Lottery. Blimey, there's a really good chance of winning at online poker tables or picking the winner of the 3.30 at Ascot at odds of 10/1.

They are different, in that you don't actually lose your stake - it's still there to withdraw again at any time.  Plus the winnings are tax free, which is a big draw for some savers, as @Band7 just outlined.

But the chances of winning on Premium Bonds are so small----the only certainty Is that your money will go down in value every day they remain as Premium Bonds.