National Savings and Investments (NS&I), the government-owned savings bank has announced that it will be increasing the Premium Bond prize fund by a total of £30m for the August 2023 draw, raising the prize fund rate from 3.70% to 4.00%.
The rate is referred to as a 'prize fund rate' or 'notional interest rate' because Premium Bonds do not pay interest in the same way as other types of savings products. Instead, Premium Bonds work like a raffle ticket, with each bond giving the owner a chance to win one of a number of monthly prizes between £25 and £1 million. Premium Bonds cost £1 each but must be purchased in bundles of at least 25. The notional interest rate is worked out by dividing the total number of Premium Bonds purchased by the total prize fund.
The prize fund boost for August will ensure that there are an additional 460,000 extra prizes on offer, increasing the notional interest rate to 4.00%, its highest rate since 2007. It means that the chances of winning a prize have increased as the odds have reduced from 24,000 to 1 down to 22,000 to 1.
A higher rate is obviously great news for Premium Bond holders, but it is worth remembering that most will not achieve anywhere near that rate of return. You can read more about Premium Bonds and how they work in our article 'What are Premium Bonds and are they worth it?'
What are the odds of winning a Premium Bonds prize?
The total prize pool has been boosted to just under £405m per month with over 5.5 million winning prizes. The odds of winning any given prize currently stands at 22,000 to 1 (down from 24,000 to 1 in July 2023). To provide some context, the odds of winning the top prize of £1m currently stands at over 50 billion to 1.
Ultimately, the more Premium Bonds you hold, the more times you will be entered into the draw and the more chances you will have of winning a prize.
How to get a guaranteed savings rate
Premium Bonds do not offer a guaranteed rate of return, meaning unlucky Premium Bond holders could see their savings eroded by inflation over time. Savings products such as fixed-rate bonds provide a fixed rate of return for those that are happy to lock their money away, usually for 1, 2, 3 or 5 years and these can be good for those who are worried about the impact of inflation. Those requiring access to their savings could consider an easy-access savings account. Check out the best rates in our article 'Best Savings Accounts in the UK'.
