National Savings & Investments (NS&I) has announced the biggest jump in Premium Bond prizes in 18 years, increasing the prize rate to 4.35% starting with the September draw. This marks the second increase to the prize fund this year, bringing the total boost since April to 1.05 percentage points, despite the Bank of England base rate remaining at 3.75%.
The enhanced prize fund will distribute an additional £63 million in prizes for the September draw, bringing the total payout to £497.3 million. In total, there will be 6.5 million prizes, an increase of 308,000. The adjustment includes a reduction in smaller £25 prizes to increase the number of larger payouts, with significant increases in £50 and £100 prizes, as well as more £50,000 and £100,000 awards. The monthly £1 million jackpot remains unchanged.
This move comes as NS&I faces pressure to meet a government target of raising an additional £15 billion, plus or minus £4 billion, in the financial year beginning April 1. The state-backed bank has reportedly fallen behind this target, with savers opting for guaranteed returns from other financial products over Premium Bonds, its best-selling product.
NS&I has also increased rates on its fixed-rate Guaranteed Growth and Income Bonds for customers with bonds maturing from August 18. The one-year Guaranteed Growth Bond now offers 4.82%, up from 4.72%, while the five-year bond is at 4.85%, up from 4.75%. The Guaranteed Income Bonds have seen similar adjustments.
Rates on variable-rate Income Bonds have risen to 3.69% from 3.4%, and the Direct Saver account's rate has increased to 3.75% from 3.45%. The Direct Saver account is particularly appealing for larger sums, as all savings with NS&I are guaranteed by the government, unlike the £120,000 limit imposed by the Financial Services Compensation Scheme with other providers.