Save, make, understand money


Premium Bonds change means more chance of winning big

Paloma Kubiak
Written By:
Paloma Kubiak

Premium Bonds holders will have more chance of scooping a life-changing sum of money from the New Year, as National Savings & Investments (NS&I) will up the prize fund rate again.

The government’s savings arm – NS&I – has confirmed it will make changes to Premium Bonds for draws from the New Year.

Premium Bonds aren’t like normal savings accounts as they don’t pay interest.

Instead, the interest that should be paid is used to fund a monthly prize draw. This will rise from 2.2% to 3% tax-free and means an extra £80m will be up for grabs from January.

According to NS&I, bond holders will have the chance of winning more than three times as many prizes worth £100,000, £50,000, £10,000 and £5,000.

The number of £100,000 prizes will rise from 18 to 56; the number of £50,000 prizes from 36 to 112; the number of £25,000 prizes will increase from 71 to 223; the number of £10,000 prizes will be upped from 178 to 559, and the number of £5,000 prizes from 359 to 1,118.

See the table below for the full break down:

All-in-all, it takes the January 2023 prize fund to an expected £299.5m and means the prize fund rate has increased for the third time this year, up from 1% in May 2022.

However, the odds of winning will remain the same at 24,000 to one.

Bonds and savings rates increase today

For the 570,000 customers with a Direct Saver or Income Bonds, they’ll see the interest rate increased from 1.8% gross to 2.3% from today.

NS&I said the rate on the Direct Saver is now at its highest level since the account was launched in March 2010, while the rate on Incomes Bonds is at its highest since February 2009.

Elsewhere, those with an Investment Account will also see the rate rise from 0.4% to 0.6% gross.

NS&I said the changes “will ensure products are priced appropriately when compared to the rest of the savings market”.

Chief executive, Ian Ackerley, said: “The New Year increase to the Premium Bonds prize fund rate will mean that customers will have seen the prize fund rate triple in less than a year. This means a bigger prize pot and more higher value prizes for our customers – a great way to start 2023.

“The change to the Premium Bonds prize funds rate, as well as the changes to Direct Saver, Income Bonds and Investment Account, will ensure that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”

Are Premium Bonds worth it?

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown, said it’s vital savers know exactly what they’re signing up for with Premium Bonds as they’re not like usual savings accounts.

She said: “Before you’re dazzled by the new prizes, it’s important to be aware of what’s involved when you buy Premium Bonds, and the impact of focusing on bigger prizes.

“Despite the average prize rate rising, there are absolutely no guarantees you’ll get anything like this, because the odds of a win are still 24,000 to one, so the average person with average luck will still win nothing. Because there’s no other interest on them, it means there’s a very good chance your stake will be increasingly eroded by runaway inflation.”

She added that by putting money into the bonds, you’re giving up any interest you might have earned on your money elsewhere.

“Right now, you can make 3% if you’re prepared to accept restrictions on withdrawals, and 2.81% without these limitations,” she said.

Coles added: “Saving reasonable sums in the bonds, for relatively short periods, could boost your chances of a win – without the risk of leaving your money in there so long that the buying power evaporates. Of course, there will always be those who are committed to Premium Bonds, and are prepared to pay the price of their stake gradually disappearing, in the hope they’ll be lucky enough to win a prize that changes their life.”