Premium Bonds prize fund rate set to increase to 3% offering ‘more value’ for NS&I savers | Personal Finance | Finance

Earlier this morning, the financial institution confirmed the rate will rise from 2.20 percent to three percent in the first month of 2023. As a result, an extra £80million in prize money will be up for grabs for Premium Bonds savers this coming January. On top of this, NS&I also announced a wave of interest rate rises across its wide range of savings products.

Around 570,000 savers are set to benefit from the financial institution’s rate hikes, which are effective from today.

These changes to the Premium Bonds prize fund rate represent the third increase that NS&I has made in 2022.

Back in May, the prize fund rate was at one percent which means it has tripled in the space of seven months.

Following this rise to the Premium Bonds rate, the January 2023 prize fund will reach an expected £299,572,750.

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In comparison, the interest rate on Income Bonds is now the highest it has been since February 2009.

The financial institution has also hiked the rate on its Investment Account from 0.40 percent to 0.60 percent.

Ian Ackerley, the chief executive, outlined what this pending increase to the prize fund rate means for Premium Bonds, as well as what the recent interest rate rises mean for customers today.

Mr 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.

READ MORE: NS&I announces December 2022 Premium Bonds prize winners

Sarah Coles, a senior personal finance analyst, Hargreaves Lansdown, added: “From January the Premium Bond prize fund will be brimming over with hundreds of extra glittering prizes. It’s bound to catch our eye at a time when money is tight and everything else in life is looking decidedly drab.

“It could end up being the Christmas present to end all Christmas presents. However, if you’re drawn by the lustre of the new prizes, you need to be clear about the price you’re paying. Premium bonds are the jewel in the crown of NS&I, and they’ll shine even brighter from January.

“The prize rate has been upped to three percent, but instead of adding more lower level prizes, NS&I has gone to town with more life-changing sums. 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 from 71 to 223, the number of £10,000 prizes from 178 to 559, and the number of £5,000 prizes from 359 to 1,118.”

What are Premium Bonds?

NS&I’s Premium Bonds do not pay interest in the same way as most traditional accounts from banks and building societies. Premium Bonds savers are automatically enrolled into a monthly prize draw where they have the opportunity to win a £1million jackpot prize.

Among the cash prizes someone can win through NS&I’s most-well known product are £100,000, £50,000 or £25,000, with the smallest prize being £25. Two winners take home the £1million prize at the beginning of every month, with the good news announced by NS&I. The next announcement is expected on January 3, 2023.