From the September draw you’ve got a better chance of winning.
After some massive base rate increases from the Bank of England, the Premium Bond prize rate is also on the up, moving from 4% to a huge 4.65% – the highest level since 1999.
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 September 2023 draw, the prize rate is 4.65%. This is up from the 4% rate set just in July and is the eighth increase in just over a year.
Once again, the odds of winning are actually improving. They’ll move from 22,000 to 1 to 21,000 to 1. This is down to there actually be more prizes, roughly another 200,000 (making a total of 5.785 million available.)
The total prize fund will increase again, this time by a massive £65 million (there’s now an estimated total prize fund of almost £470 million). This is down to a change in how many of each prizes are available.
The number of £25 prizes falls again, down by almost 700,000, but there are large increases at the other levels.
There are 465,000 more £50 and the number of extra £100 prizes. And there are smaller increases for prizes between £500 and 100,000. There are still just two £1 million prizes.
How much could you win?
Here’s how the new increased draw compares to the one at the start of June 2023. As you can see there are more “higher value” prizes, so if you win you’re likely to win more money than in previous draws, but you’re just as likely to win a prize of some value
|Value of prizes in August 2023||Number of prizes in August 2023||Value of prizes in September 2023 (estimated)||Number of prizes in September 2023 (estimated)|
|Total £404,560,900||Total 5,516,739||Total £470,827,650||Total 5,785,904|
Previous prize rates
- July 2023 – 4%
- June 2023 – 3.75%
- March 2023 – 3%
- February 2023 – 3.15%
- January 2023 – 3%
- September 2022 – December 2022: 2.2%
- May 2022 – August 2022: 1.4%
- December 2020 – April 2022: 1%
What you’ll probably win
It’s hard to give an exact figure on your likely winnings as 4.65% on Premium Bonds doesn’t mean you get £4.65 back for every £100. That’s the average return if you have average luck.
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. So they’re going to be better options for those with more cash, and less good for those with smaller amounts.
The MoneySavingExpert Premium Bonds calculator usually gives a good indication of the wins over a year. However right now it’s showing some odd results, so it’s best avoided for now.
And there’s a good chance you’ll get nothing. Since the smallest prize is £25, you’d think you’d need £537 saved to get the prize rate (£537 / 4.65% = £25). But it’s not that simple.
With this rate, the odds of a bond (not a person) winning something are 21,000:1. That means for every 21,000 bonds, only one bond will win a prize and 20,999 bonds won’t.
How they compare to savings accounts
The highest paying easy-access savings account right now with no limit on the balance is from Tandem, paying 5%. That’s better than the Prize Rate of 4.65%, and it’s a guaranteed return on all balances.
And there are even higher paying options with some restrictions. Barclays pays 5.12% on up to £5,000 for Blue Reward customers, while the Regular Saver from First Direct offers 7% (though only on £300 a month). These are likely better bets for your initial deposits.
Plus, one-year fixes are still around 6% – so if you don’t think you’ll need the money for a year then these blow Premium Bonds out of the water.
However it’s worth noting that any prizes won via Premium Bonds are tax free. With interest rates increasing it could be you’re closer to going over your personal savings allowance, so money in Premium Bonds could help you avoid tax.
Or if you’re (or about to be) an additional rate taxpayer then it’s an option instead or as well as ISAs.
What about future interest rises?
We’ve seen 14 successive interest rate rises from the Bank of England since December 2021, and it’s probable we’ll see some more increases to this base rate 2023. If that happens, it will mean some savings accounts will (eventually) react and move their rates up again.
This would mean that even more banks will beat this new Premium Bonds prize rate. Again, giving you the certainty of the return you get.
Of course, NS&I could also then increase the prize rate for Premium Bonds again – though there’s no guarantee it’ll happen straight away.
Buying Premium Bonds
When to buy Premium Bonds
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 September draw will only be for anyone who saved prior to the end of July 2023. If you have put any money in August 2023, you won’t have a chance of winning until October 2023.
This also means it makes sense to deposit money right at the end of a month than at any other time.
How to buy Premium Bonds
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.