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NS&I to increase the Premium Bond prize rate to 2.2% – here's all you need to know

NS&I will increase its Premium Bond prize-fund rate to 2.2% from 1.4% in its October draw, increasing the odds of a win from 24,500-to-one to 24,000-to-one. The change means there will be around 100,000 extra chances of winning in the October draw – with a small increase in the number of larger prizes available and a drastic increase in the number of £50 and £100 prizes on offer.

It's estimated that the number of £100,000 prizes will rise from 10 to 18, while the number of £50,000 prizes will rise from 20 to 35 – although there will still only be two monthly winners of the top £1 million prize.

There's also a considerable change to the distribution of smaller prizes – it's estimated that the number of £50 and £100 prizes will both rise by nearly 700,000 each, though this is mostly offset by the number of £25 prizes falling by almost 1.3 million.

While the rise is good news, most savers with typical luck will still do better on average by saving elsewhere – as most won't come close to getting a return of 2.2%, even with the maximum £50,000 invested. Plus, the rate is still far lower than the top short-term fixed rates – the top six-month fix currently pays 2.5%, while the top one- and two-year fixes pay a considerably higher 3.9% and 4.1% respectively. See our Top savings guide for more.

The number of prizes will rise but your odds of winning are still relatively low

Premium Bonds are essentially a savings account you can put money into, where instead of being paid interest, tax-free prizes are awarded in a monthly draw. Prizes range from £25 to £1 million.

The nearest thing Premium Bonds have to an interest rate is their annual prize rate, which is what's increasing from 1.4% to 2.2%. It's a benchmark of the "average" return you'll get for your money – though in reality, there's no guarantee you'll win anything at all.

What it really means is that for every £100 invested in Premium Bonds, £1.40 (soon to be £2.20) is paid out every year in prizes. But as the prizes include two £1 million payouts and other big prizes, many also win far less – even with the rate increasing.

Below is a breakdown of how the number of prizes awarded is estimated to change from October:

Number of Premium Bond prizes 

Value of prize Number of prizes in September 2022 Number of prizes (estimated) in October 2022
£1,000,000 2 2
£100,000 10


£50,000 20


























Total: 4,862,556

Even with the rate increase, Premium Bonds are likely to be beaten elsewhere

NS&I chief executive Ian Ackerley said the increased prize-fund rate means that Premium Bonds will "remain attractive" when compared against the interest rates of other savings providers.

But for most savers with average luck, and who don't pay tax on savings interest, normal savings are still likely to beat Premium Bonds. This is because savings pay a constant rate of interest – so if you get the top easy-access rate of 2.5%, you'd get roughly £25 in interest for every £1,000 saved. Though this rate is variable, it provides more certainty than Premium Bonds, where many saving the same £1,000 would win nothing.

Many people often think "I'm likely to get about 1.4% – soon to be 2.2% – and there's a small chance of winning a million". But the main point is that this isn't correct. You're actually likely to get quite a lot less than 1.4% or 2.2%, and there's a negligible chance of winning a million. If you know and you're OK with this, then investing in Premium Bonds isn't a bad plan. For full info, see our Premium Bonds – are they worth it? guide.

Premium Bond prizes are tax-free – though this won't benefit the majority

The majority of people don't pay any tax on savings interest due to the personal savings allowance, so the fact that Premium Bond prize winnings are tax-free won't make a difference to many.

The only exception is if you're one of the small percentage of people who pay tax on interest, and you hold a lot of Premium Bonds, as here they may be worth it. For this group, tax-free cash ISAs will likely beat normal savings and Premium Bonds, but if you've maxed out your £20,000-a-year ISA allowance, and you hold a lot of Premium Bonds, you could beat the returns you get from normal savings with bonds.

You can buy Premium Bonds via the NS&I website

If they're right for you, the minimum amount you can buy is £25 for one-off purchases and monthly standing orders, while the maximum amount you can hold is £50,000.

Prizes are always tax-free (they're also backed by the Government, meaning your money's fully protected – though savings held with any UK-regulated institution are also protected up to £85,000). For more info on how Premium Bonds work – and whether they're worth it – see our Premium Bonds guide. 

To ensure you're making your savings work for you, see our Top savings and Top ISAs guides for more info.

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