Many savers are now wondering if their odds of winning the savings product’s £1million lottery have improved. The financial institution hiked the prize fund rate for Premium Bonds from one percent to 2.4 percent as of June’s draw. Before the change, the odds of someone winning money from NS&I’s lottery were one in 34,500.
As a result of NS&I’s decision, the odds of winning has now changed to one 24,500 for each bond someone holds.
Unlike other savings accounts or products, Premium Bonds does not acquire interest in a traditional way.
Those who purchase bonds are enrolled into a monthly prize draw where they have the opportunity to win a £1million jackpot prize.
Examples of other cash prizes someone can win through NS&I’s savings product are £100,000, £50,000 or £25,000.
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As well as raising the rate on Premium Bonds’ prizes, NS&I has hiked the interest rate across other savings accounts.
From July 21, the rate on the organisation’s Direct Saver, Income Bonds, Direct ISA and Junior ISA has risen.
Earlier this week (August 1), the rate paid on interest for NS&I’s Guaranteed Growth Bonds, Guaranteed Income Bonds and Fixed Interest Savings Certificate also went up.
It should be noted that none of these savings accounts will see their rates exceed the 9.4 percent rate of inflation.
John Glen, the Economic Secretary to the Treasury, praised the financial institution’s decision to hike the prize fund rate.
Mr Glen said: “Premium Bonds have offered the public an alternative way to save since they were first introduced in 1956, and next week marks 65 years since ERNIE drew the first Premium Bonds prize winners.
“I’m delighted to see NS&I raise the prize fund rate on Premium Bonds, which will see an additional 1.4 million prizes worth £40million being returned to savers each month – helping to put money in the pockets of the nation’s savers.”
Ian Ackerley, the NS&I’s chief executive, added: “The new prize fund rate ensures that Premium Bonds are priced appropriately when compared to the interest rates offered by our competitors.
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“It also ensures that we continue to balance the interests of savers, taxpayers and the broader financial services sector.
“Premium Bonds customers will benefit from the chance to win a further 1.4 million tax-free prizes each month, as well as the peace of mind that customers get with 100 percent of their NS&I savings being backed by HM Treasury.”
Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, warned potential savers that the increased prize fund rate for Premium Bonds does not operate the same way a hiked interest rate does for a traditional savings account.
Ms Coles explained: “You also need to appreciate that the prize rate is not the same as the returns you can expect.
“If you hold the bonds you won’t make 1.4 percent. Those with better-than-average luck will make more, and those with less luck can go decades without a win.
“In an average year, someone with £1,000 in the bonds will win nothing. It’s worth knowing the chances of a win too.
“While the chance of any win at all with a £1 bond is 24,500, in May, the chances of winning £1million were one in 58.91 billion – which is vanishingly small.
“Even after the prize rate changes, there will still only be two million pound prizes, so the odds of winning a million haven’t improved – in fact as more people buy more bonds, unless the number of million pound prizes increases, the odds will get worse.”