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NS&I announces Premium Bond prize rate hike from October 2022

NS&I announces Premium Bond prize rate hike from October 2022

Premium Bond prize rate will jump from 1.4% to 2.2%, bringing it in line with the best comparable savings accounts.

lovemoney staff

Banking and Borrowing

lovemoney staff
Updated on 27 September 2022

Savers have been dealt a welcome boost today after National Savings & Investments (NS&I) announced a significant hike to the Premium Bond prize rate.

Starting from the next Premium Bond draw on 1 October, the rate will rise from 1.4% to 2.2% meaning savers will be in line to win many more high-value prizes.

For example, the total number of £100,000 prizes will jump from 10 to 18, while the £50,000 prize tally is set to rise from 20 to 35.

There will still only be two £1 million jackpots, however.

While the rise needs to be seen in the context of inflation standing at a whopping 9.9%, it's nonetheless a welcome change that could benefit millions of savers.  

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Breakdown of Premium Bond prizes

Value of prizes in September 2022

Number of prizes in September 2022

Value of prizes in October 2022 (estimated)

Number of prizes in October 2022 (estimated)

£1,000,000

2

£1,000,000

2

£100,000

10

£100,000

18

£50,000

20

£50,000

35

£25,000

39

£25,000

72

£10,000

98

£10,000

178

£5,000

199

£5,000

357

£1,000

2,779

£1,000

4,364

£500

8,337

£500

13,092

£100

38,137

£100

728,737

£50

38,137

£50

728,737

£25

4,774,798

£25

3,484,716

Total:

£138,988,000

Total

4,862,556

Total

£218,253,450

Total

4,960,308

Why NS&I has hiked the prize rate

Remarkably, this will be the second Premium Bond rate hike since the start of the summer, having increased from 1% to 1.4% back in June.

In truth, NS&I has been forced to respond to the sudden and dramatic increases we've seen across the savings market in recent months, which have come about as a result of the repeated increases to the Base Rate of interest.

Take a look at the Bank of England graph below. The Base Rate sat at 0.1% just 10 months ago, but has since rocketed to 2.25% - rising a whopping 1% since the start of August alone. 

This has finally sparked some life in the savings market and you can now earn over 4% on some long-term fixed-rate savings accounts. 

Top accounts on Raisin: earn 4.25% with Investec's two-year fixed-term deposit

Base Rate graph (Image: Bank of England)

How competitive is the new Premium Bond rate?

NS&I chief executive, Ian Ackerley, said the October rate will ensure that Premium Bonds "remain attractive" to savers.

So how attractive are they in comparison to other savings accounts?

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

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 from newcomer Yorkshire BS and offers a 2.5% rate.

However, that account only allows two withdrawals per year and falls to 2% on balances over £5,000 so it's perhaps not the best alternative to Premium Bonds.

Ford Money's Flexible Saver allows unlimited withdrawals and lets you save up to £2 million, so it's certainly a fair comparison. This pays a rate of 1.95%, while Atom Bank's Instant Saver is next best with a rate of 1.9% followed by Hoist Saving's Easy Access account on 1.85%.

Given that all NS&I accounts come with the added security of Government-backing, Premium Bonds certainly look like an attractive proposition by comparison.

Can we expect further hikes in the coming months?

While we have no way of knowing what will happen next, it does seem likely that the Base Rate of interest is going to continue rising in the short to medium term.

Indeed, following the recent collapse in the value of the pound, the money markets are now predicting it could hit an incredible 6% at some point next year.

That in turn would likely drag savings rates - and Premium Bonds - along with it.

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This article contains affiliate links, which means we might receive a small commission if you take out any of the products mentioned. However, this hasn't affected our editorial judgement and won't affect the rate you are offered.

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