NS&I to hike Premium Bond prize rate to 3.8% from June 2026

Premium Bond holders finally got some good news after National Savings & Investments announced plans for a sharp increase in the prize rate. But can the improved offering compete against the top savings deals on the market?

National Savings & Investments has announced the first increase to the Premium Bond prize rate in almost three years.

From June, the rate will jump from its current 3.3% to 3.8%, while the odds of any single bond winning a prize shortens from 23,000 to one to a slightly-more-palatable- 22,000 to one.

It's the first bit of good news Premium Bond holders have received in quite some time, given the last increase came way back in September 2023.

In between these two hikes, the rate has been cut a staggering six times, as you can see in the table below.

Premium Bond prize rate changes

Source: NS&I

How competitive is the new Premium Bond rate?

The decision to finally increase the rate will be a boost for savers given the remarkable popularity of the bonds: more than 20 million Brits currently hold them.

However, that's not to say the bonds are suddenly competitive against the very best savings deals on the market.

The reality is you'll likely be losing out on a healthy chunk of interest by opting for Premium Bonds, as we'll illustrate in the next section.

Rate check: Premium Bonds vs 'normal' savings 

Obviously, most savings accounts don't work like Premium Bonds as they pay a set rate to all savers rather than handing out prizes to select winners.

Perhaps the best comparison is easy access savings accounts, which allow you to deposit and withdraw money in a broadly similar fashion.

The best such account currently on the market is the Boost saver from Chase Bank, offering a rate of 4.5%.

However, this is a linked savings account, meaning you'll need to open a current account through the Chase app to get your hands on it. While opening said account won't require a hard credit search, it still requires a little more effort to qualify. 

The most generous account we could find that's open to everyone is from Charter Savings Bank, which offers a rate of 4.26%.

In truth, there are a bunch of easy access accounts currently paying more than 4.2% on your funds, leaving the Premium Bond prize rate in the shade even once you factor in the increase to 3.8% in June.

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Don't forget about the tax benefits of Premium Bonds

It's at this point that we need to factor in tax when comparing accounts. 

One of the big draws of Premium Bonds is that any money you win is completely tax-free. 

That's not the case with traditional savings accounts. Depending on your marginal tax rate, the Personal Savings Allowance lets you earn a maximum of £1,000 in interest before you start paying tax. 

For most savers with small pots, their earnings are effectively tax-free, no matter where they save, as they'll stay comfortably below this threshold.

But for those with slightly larger pots, tax is very much a consideration. 

With that in mind, it's worth looking at how Premium Bonds compare to Cash ISAs, which are also tax-free. 

And the difference is even starker here. 

The best access Cash ISA currently on the market is from Trading 212 and pays an impressive 4.51%, well ahead of where the Premium Bond prize rate will be in June.

Of course, ISAs come with an annual allowance of £20,000, so those with large savings to set aside will need to build up their pot over the years.

By contrast, Premium Bonds allow you to hold up to £50,000, and you can deposit this all at once if you have the funds.

How Premium Bonds compare in pounds and pence

To further illustrate the huge difference between Premium Bonds and the best similar savings accounts, let's look at how much you can expect to earn by putting your money into some of these pots.

Obviously, with Premium Bonds involving an element of luck – you could end up winning nothing at all or you could beat the odds and become a millionaire.

So let's assume you have average luck and earn a return equivalent to the prize rate, which is currently 3.3% but as mentioned will be 3.8% from the June draw.

On a £20,000 pot, the average punter would win £760 over the course of a year. 

Had you put that money in the Chase access savings account we mentioned earlier, you'd earn £900 over the course of a year (assuming you didn't incur a tax bill).

Put the money in the top Cash ISA from Trading 212 and you'd earn a marginally better £902 – that's £142 more than you'd likely with Premium Bonds (assuming average luck).

* From June 2026 the prize rate will rise from 3.3% to 3.8% 
** Assuming average luck

Premium Bonds falling behind

As we mentioned earlier, it's impossible to say definitively whether you'll be better off choosing a traditional savings account over Premium Bonds, given the element of luck involved in the latter.

However, there's no question that the bonds have fallen notably behind the best products on the market in recent years. 

Back in 2023, the Premium Bond rate actually exceeded the best access Cash ISA rate on the market by 0.25% and was only 0.35% behind the best access savings account.

Even once the impending increase is factored in, the Premium Bond prize rate will still be a hefty 0.71% below the best access Cash ISA and 0.7% behind the top access account.

Clearly, savers are being asked to pay a larger penalty to be in with the chance of winning one of the increasingly rare big prizes each month.  

It's up to individuals to decide whether that penalty is still worth paying.