From the June draw you’ve got a better chance of winning.
After months of base rate increases from the Bank of England, the Premium Bond prize rate is also on the up, moving from 1% to 1.4%.
Here’s what this means for your chance of winning, and how it compares to the latest best buy savings accounts.
What are Premium Bonds
Premium Bonds are effectively savings accounts held with the government. Rather than getting interest back on your savings, you are entered into a draw with a top prize each month of £1 million.
Other prizes vary between £25 and £100,000 and if you do win it’s all tax-free. You can read more about how they work here.
The new Prize Rate
From the June 2022 draw, the prize rate is 1.4%. This is up from 1%, where the rate has sat for 18 months since December 2020.
There will be an extra 1.4 million prizes available (a total of 4.8 million) worth an extra £40 million (there’s now a total prize fund of £138 million). So there’s a good chance if you have any Premium Bonds you’ll win more money, more often.
How much could you win?
There’s still a good chance you’ll get nothing. NS&I says there are 25 million customers with bonds. Even if the prizes were evenly distributed by each person (rather than each bond), that would still leave four out of five people not winning each month.
But prizes aren’t shared this way, since the prizes vary in value. So on each draw, most people won’t win anything. Still, the odds of winning something will increase from 34,500:1 to 24,500:1. That means for every 24,500 bonds, only one bond will win a prize and 24,499 bonds won’t.
It’s hard to give an exact figure on your likely winnings as 1.4% in Premium Bonds doesn’t mean you get £1.40 back for every £100.
In reality, it’s only those with close to the maximum £50,000 who are likely to get close to this rate (on average – it could be more or less). While those with less than a grand are likely to win nothing at all.
Here’s how the new increased draw compares to the one at the start of May 2022.
|Value of prizes in May 2022||Number of prizes in May 2022||Value of prizes in June 2022 (estimated)||Number of prizes in June 2022 (estimated)|
How they compare to savings accounts
The highest paying easy-access savings account right now is from Chase Bank, paying 1.5%. Not only is that a guaranteed return on all balances, but it’s also likely higher than even someone with average luck on Premium Bonds. So if you want certainty or have smaller amounts, that’s a winner.
Below that, at the time of writing, you’re looking at 1.31% at best. So there’s a decent chance a large number of Premium Bonds will beat these – right now.
As soon as MoneySavingExpert updates its Premium Bonds calculator I’ll add a full comparison here.
What about future interest rises?
We’ve seen four interest rate rises from the Bank of England since December 2021, and in that time easy-access rates have improved a lot. And we’re expecting more increases to this base rate in 2022. If that happens, you’d expect some savings accounts to (eventually) react and move up again.
This would mean that there will be more banks than just Chase who beat this new Premium Bonds prize rate. Again, giving you certainty of the return you get.
Of course, NS&I could also then increase the prize rate for Premium Bonds – though there’s no guarantee it’ll happen straight away (bear in mind it took them six months to make a change this time).
Buying Premium Bonds
When to buy
If you’re tempted by the increased rate, there’s one very important rule you need to know about. Your money needs to have been held in Premium Bonds for a full month before it’s entered into a draw.
That means this June draw will only be for anyone who saved prior to the end of April 2022. If you have put any money in May 2022, you won’t have a chance of winning until July 2022.
This also means it makes sense to deposit money right at the end of a month than at any other time – so you’ll want to act fast to get cash saved this month.
How to buy
You buy PBs from NS&I website or over the phone at a cost of £1 each, but you have to buy at least £25 worth. You have to be over 16 years old to buy Premium Bonds for yourself. If you are buying them for children, the account will be held by the parents/legal guardians until the child reaches 16.