From the October 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 1.4% to 2.2%.
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 2022 draw, the prize rate is 2.2%. This is up from the 1.4% rate set in June. Before that the rate had sat for 18 months since December 2020.
There will be an extra 100,000 prizes available (a total of 4.96 million) worth an extra £76 million (there’s now an estimated total prize fund of £218 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 22 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 24,500:1 to 24,000:1. That means for every 24,000 bonds, only one bond will win a prize and 23,999 bonds won’t.
It’s hard to give an exact figure on your likely winnings as 2.2% in Premium Bonds doesn’t mean you get £2.20 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 September 2022.
|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)|
|Total: £138,988,000||Total: 4,862,556||Total: £218,253,450||Total: 4,960,308|
How they compare to savings accounts
The highest paying easy-access savings account right now with no limit on the balance is from Al Rayan, paying 2.1%. Though that’s lower than 2.2%, that is a guaranteed return on all balances. And it’s also likely higher than what even someone with average luck on Premium Bonds will get. So if you want certainty or have smaller amounts, that’s a winner.
If you can put close to the full £50,000 in then you might get close to 2.2%, in which case Premium Bonds could be worth considering. However, you can get higher rates on smaller amounts elsewhere.
Yorkshire Building Society offers 2.5% on the first £5,000 right now, while the Digital Regular Saver from Natwest or RBS offers 5.12% (though only on the first £1,000 saved). These are likely better bets for your initial deposits.
Plus, one-year fixes have gone above 4% – so if you don’t think you’ll need the money for a year then these blow Premium Bonds out of the water.
As soon as MoneySavingExpert updates its Premium Bonds calculator in early October I’ll add a full comparison here.
What about future interest rises?
We’ve seen seven successive interest rate rises from the Bank of England since December 2021, and we’re expecting more increases to this base rate in 2022 and 2023. When (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 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.
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 October draw will only be for anyone who saved prior to the end of August 2022. If you have put any money in October 2022, you won’t have a chance of winning until December 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.