Premium Bonds: NS&I to increase fund rate to 1.40% – extra 1.4 million prizes for savers | Personal Finance | Finance

The financial institution outlined its plans to hike the fund rate from one percent to 1.40 percent. This is set to come into effect as of the June 2022 Premium Bonds draw and will see an extra 1.4 million prizes paid out. As a result, the odds of each £ 1 bond number winning a Premium Bonds prize will also change from 34,500 to one to 24,500 to one.

John Glen, the economic secretary to the Treasury, shared his enthusiasm for the new rate hike.

Mr Glen explained: “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, 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.”

Savers are likely to welcome this news as the cost of living crisis and rising inflation puts further financial pressure on them.

With odds of winning the Premium Bonds now improved, more savers may choose to use one of NS & I’s savings products.

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Premium Bonds is a savings product managed by NS&I, which is backed by the Government via HM Treasury.

Compared to other savings accounts, no traditional interest is earned on Premium Bonds. Rather than an interest rate, there’s a monthly prize draw for tax-free prizes.

However, inflation can reduce the value of what a person has in bonds over time which does come to the detriment of savers.

With inflation hitting nine percent as of last week NS & I’s latest intervention is likely in response to it.

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Among the high value prizes people can win through the draw are £ 1million, £ 100,000, £ 50,000 or £ 25,000, with smaller payouts also included in the draw.

In last month’s prize draw, two lucky winners took home the £ 1million prize, being picked randomly by ERNIE, otherwise Electronic Random Number Indicator Equipment.

Overall, 3.3 million other Premium Bonds prizes were paid out for the month of May, worth between £ 25 and £ 100,000.

Bonds holders will be able to see if they have won a prize in June’s upcoming draw by logging onto the nsandi.com prize checker after the results are announced next month.

They will need their Premium Bonds holder’s number to use the website and their NS&I number or holder’s number to check via the prize checker app. It is also possible for bond holders to check if they have any unclaimed prizes owed to them.

Discussing Premium Bonds earlier this week, Hargreaves Lansdown’s personal finance analyst Sarah Coles, said: “You need to understand what you’re giving up. You don’t make any interest on money in Premium Bonds.

“And while at a time of low inflation you may feel this is a small price to pay for the chance of a big win, while inflation is running so hot, it means the spending power of your money is being eroded far more quickly. It means holding Premium Bonds comes at a higher cost.

“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 one 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. “

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