In a move few experts would have predicted, NS&I has announced it is raising its Premium Bonds rate from the August 2023 prize draw, the prize fund rate will increase to 4% from 3.70%, its highest level since 2007.

The odds on each bond winning a prize will improve to 22,000 to one from 24,000 to one, meaning that each £1 bond will have its best chance of winning a prize in almost 15 years.

NS&I estimates that the changes will see an extra £30m added to the prize fund from August, with an estimated 460,000 extra prizes up for grabs.

Increases to other variable products

The interest rates that NS&I pays on its Direct Saver and Income Bonds are also increasing from 2.85% to 3.40%, effective from 13 July.

Also effective on the same date, NS&I will be increasing the interest rate that it pays on its Investment Account from 0.60% to 0.85%.

Dax Harkins, NS&I chief executive, said: “Premium Bonds are one of the nation’s favourite savings products and I’m delighted that we’re able to improve the odds to the best they have been in almost 15 years, with more prizes, more excitement and more life changing wins for savers up and down the country.

“These changes will benefit millions of NS&I’s savers who have money in Premium Bonds, Direct Saver and Income Bonds.”

NS&I said that the changes ensure that NS&I’s products remain attractive to customers and that it “continues to balance the interests of savers, taxpayers and the broader financial services sector”.

Previously, experts predicted that NS&I wouldn’t raise interest rates as it had exceeded its fundraising target by £1bn in 2022/23.