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NS&I to increase Premium Bond prize rate to 3.7% – here's all you need to know

NS&I will increase its Premium Bond prize-fund rate to 3.7% from 3.3% for its July 2023 draw and beyond, with an extra £39 million in higher-value prizes up for grabs. This latest increase – the sixth we've seen in just over a year – is to the highest rate in 15 years. The odds of winning will remain the same at 24,000 to one, but there will more prizes between £50 and £100,000 available.

The biggest differences are in the number of smaller prizes – approximately 640,000 of the lowest-value £25 prizes will be shifted to higher-value prizes of between £50 and £100,000, with the number of £50 and £100 prizes both increasing by approximately 320,000.

There's less of an increase for prizes between £500 and £100,000 and there will still only be two monthly winners of the top £1 million prize. There's very little change to the total number of available prizes at just over 5 million.

While the rise is good news, the 3.7% Premium Bond prize-fund rate is still a little behind today's top easy-access savings rate of 4.21%. And most people with typical luck won't actually get a return of 3.7%, even with the maximum £50,000 invested. The reason behind this is quite complex – see our Premium Bonds guide for a full explanation.

Plus, the rate is quite a bit lower than the top short-term fixed rates – the top six- and nine-month fixes currently pay 5.1% and 5.08% respectively, while the top one-year fix pays 5.78%. See our Top savings guide for more.

There are more higher-value prizes, but your odds of winning are still quite 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 3.3% to 3.7%. 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, £3.30 (soon to be £3.70) is paid out every year in prizes. But as the prizes include two £1 million pay-outs 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 July 2023:

Number of Premium Bond prizes 

Value of prize Number of prizes in June 2023 Number of prizes (estimated) in July 2023
£1,000,000 2 2
£100,000 63


£50,000 125


























Total: 5,061,328 5,054,415

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

NS&I chief executive Ian Ackerley said "With the changes, we’re expecting to pay out more than £374 million to winners in July with more higher value prizes, meaning that, each month, more lives will be changed by Premium Bonds".

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 4.21%, you'd get roughly £42.10 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 3.3% – soon to be 3.7% – 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 3.3% or 3.7%, 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 guide.

Premium Bond prizes are tax-free – though cash ISAs will likely win for most

With the increase in savings rates we've seen in the past year, you now need far less in savings before you starting paying tax on the interest. With today's top easy-access rate of 4.21%, it now takes £23,750 in savings for basic-rate taxpayers to exceed the personal savings allowance and start paying tax on the interest (£11,900 for higher-rate taxpayers). So the fact that Premium Bond prize winnings are tax-free is a boon for some.

Yet tax-free cash ISAs will still likely be the better choice for many. The top easy-access cash ISA rate is currently 3.85% – a smidge higher than the Premium Bond prize-fund rate – and with it you get a guaranteed return on your savings. So if you've enough in savings to exceed your personal savings allowance (or you will soon), cash ISAs will likely beat both normal savings and Premium Bonds.

There is one group who may still benefit from Premium Bonds, however. If you've large savings and you've maxed out your £20,000-a-year ISA allowance, and you've enough savings leftover to exceed your personal savings allowance in normal savings, Premium Bonds could give you a better return (if you're lucky).

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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