Premium Bonds savers may want to reconsider their savings arrangements. NS&I has announced a new issue of its British Savings Bonds that have gone on sale, with higher interest rates.
This includes the fixed-term issues of its Guaranteed Growth Bonds and Guaranteed Income Bonds. The uptick in rates may prompt Premium Bonds holders to ask if there will be a similar increase in the prize fund rate.
NS&I has cut the prize rate for Premium Bonds several times this year, in January, April and August. The rate is currently 3.6 percent, with the odds of each £1 Bond winning a prize at 22,000 to one.
Sarah Coles, head of personal finance at Hargreaves Lansdown, said she doesn’t think the rates hike from NS&I will mean a similar change for Premium Bonds.
She explained: “When NS&I is in fund-raising mode, you can’t rule out a Premium Bond prize rate rise, but it doesn’t feel enormously likely. This change is designed to hoover up people looking for fixed-term deals. It’s only if this falls short of expectations that NS&I might look elsewhere.”
In fact, she thinks the prize rate is more likely to continue to fall. The expert said: “The wider picture is one of very gradually falling rates, so assuming NS&I doesn’t need to pull the emergency lever, there’s every chance that the next move for the Premium Bond prize is a cut in the coming months.”
Yet she said this will likely have little impact on the popularity of the savings scheme, as many bondholders choose to keep their holdings despite the dwindling chance of bagging a big prize. She warned: “Even now, the average bondholder will win nothing in the average month. It means your savings are likely to lose money after inflation.”
She encouraged bondholders to be active in monitoring their savings. Ms Coles said: “It’s always worth taking stock regularly, and considering whether you’re still happy with the deal, or whether you’d prefer the certainty of a strong rate in the wider savings market. Check what’s available from online banks and saving platforms, where you’ll usually find the strongest deals.”
Each £1 Bond eligible to go into the monthly prize draw has an equal chance of being paired with a prize. Prizes range from £25 up to a £1million jackpot. There are always two £1million prizes in each draw.
You can set up your account so any winnings you get are automatically used to buy more Bonds, increasing your chances of winning again.