National Savings & Investments (NS&I) has announced the most significant increase in Premium Bond prizes in 18 years, with the prize rate rising to 4.35% from the September draw, up from 3.8%. This change, which takes effect next month, is the second prize fund increase this year and brings the total rise since April to 1.05 percentage points, despite the Bank of England base rate remaining at 3.75%.
The boost means an additional £63 million will be distributed in prizes in September, bringing the total prize fund to £497.3 million. The number of prizes will increase by 308,000, reaching 6.5 million in total. NS&I is also adjusting the distribution of prizes, with fewer £25 prizes and a greater number of larger payouts, including more £50 and £100 prizes, as well as an increase in £100,000 and £50,000 awards. The two £1 million jackpots per month will remain.
This move comes as NS&I aims to raise an additional £15 billion, with a £4 billion margin of error, between April 1 and the end of the fiscal year. The state-backed bank has been lagging behind this target, experiencing sluggish sales as savers have moved to other offerings with higher guaranteed returns. The increased prize rate and enhanced prize distribution are intended to make Premium Bonds more competitive and attract funds back to the institution.
In addition to Premium Bonds, NS&I has also raised rates on its fixed-rate Guaranteed Growth and Income Bonds for the fourth time this year and the second time in three weeks. Customers with maturing bonds from August 18 will receive the new rates. The one-year Guaranteed Growth Bonds will now yield 4.82%, the two-year bonds 4.81%, the three-year bonds 4.83%, and the five-year bonds 4.85%. The Guaranteed Income Bonds have also seen rate increases, with one, two, three, and five-year terms now offering 4.72%, 4.71%, 4.73%, and 4.75% respectively.
Rates on variable-rate Income Bonds have been increased to 3.69% from 3.4%, and the Direct Saver easy-access account rate is rising to 3.75% from 3.45%. The Direct Saver is particularly noted for its appeal to those with large sums, as all funds held with NS&I are guaranteed by the government, unlike the £120,000 limit imposed by the Financial Services Compensation Scheme with other providers.