Andrew Westhead, NS&I Retail Director, said: "Premium Bonds offer the monthly excitement of tax-free prizes with 100% security backed by HM Treasury, and the flexibility to withdraw at any time. So, I'm pleased that from July we can improve both the prize fund rate and the odds meaning even more chances to win for our 22 million Premium Bonds holders".
At the same time, NS&I has also announced immediate interest rate increases across several of its variable savings accounts, including its Direct Saver, Income Bonds, Direct ISA and Junior ISA. Andrew Westhead continued, "We regularly review our products to ensure they reflect current market conditions, and we're pleased to be able to improve rates across five variable savings accounts today. This reflects changes in the wider savings market and helps ensure we meet our Net Financing target".
What are Premium Bonds?
Premium Bonds are a unique type of savings product issued by National Savings and Investments (NS&I), the UK's government-backed savings bank. Instead of earning a guaranteed interest rate like you would with a standard savings account, each £1 bond you buy is entered into a monthly prize draw. This gives you the chance to win tax-free cash prizes ranging from £25 right up to a £1 million jackpot. Premium Bonds have a unique appeal because they are entirely backed by HM Treasury. It means 100% of the money you put in is completely secure, and you have the flexibility to withdraw your cash at any time without paying a penalty. For higher-rate and additional-rate taxpayers who have exhausted their Personal Savings Allowance, Premium Bonds can be a highly attractive home for their cash.
Premium Bond prize breakdown
The Premium Bond prize fund rate, often referred to as the 'notional interest rate', is a benchmark that describes the average rate at which prizes are paid out over a year. Once the rate increases to 3.80% in July, NS&I will effectively pay out £3.80 in prizes for every £100 invested in Premium Bonds. Of course, because prizes are determined by a random draw, there is no guarantee that you will win anything at all, even if you hold the maximum £50,000 allowed.
However, the change means that the odds of any single £1 bond winning a prize will improve from 23,000 to 1, down to 22,000 to 1. NS&I estimates that the July draw will provide an extra 322,000 prizes compared to May 2026, bringing the total prize pot to around £436.8 million.
While the two £1 million jackpot prizes will remain, the overall number of smaller prizes will increase significantly, as shown in the table below.
| Value of prizes | Prizes in May 2026 | Prizes in July 2026 (estimate) |
| £1,000,000 | 2 | 2 |
| £100,000 | 71 | 83 |
| £50,000 | 143 | 167 |
| £25,000 | 285 | 334 |
| £10,000 | 712 | 835 |
| £5,000 | 1,425 | 1,667 |
| £1,000 | 15,046 | 17,472 |
| £500 | 45,138 | 52,416 |
| £100 | 1,538,283 | 1,945,344 |
| £50 | 1,538,283 | 1,945,344 |
| £25 | 2,808,135 | 2,306,675 |
| Total Prizes | 5,947,523 | 6,270,339 |
| Total Prize Money | £376,180,825 | £436,833,475 |
For a more detailed look at Premium Bonds, check out our article 'How do Premium Bonds work'. In it, we include a detailed simulation showing the total winnings for 100 people based on holding the maximum £50,000 in Premium Bonds.
Why has the prize fund rate gone up?
NS&I adjusts its rates to balance the interests of savers, taxpayers, and the wider financial services sector. The decision to increase the prize fund rate and improve the odds of winning is a response to the changing landscape of the savings market. Furthermore, NS&I has a 'Net Financing target' set by the government, which dictates how much money it needs to raise. For the 2026/27 tax year, this target is £15 billion. Offering a more competitive prize rate is a key way to attract new savers and encourage existing bondholders to keep their money invested.
How to get the best return on your savings
It is important to remember that the 3.80% prize fund rate for July is an average. While some bondholders will win big, others with typical luck may earn a return that is well below the headline rate, or perhaps nothing at all. If certainty is your priority, Premium Bonds cannot offer the guaranteed monthly return of a standard savings account and you can find higher guaranteed rates elsewhere in the savings market.
If you want the tax benefits and flexibility offered by Premium Bonds but prefer a guaranteed rate of return, an easy-access cash ISA might be a better option. Currently, the top easy-access cash ISAs are paying around 4.51%. Because the interest earned inside an ISA is tax-free, this will outpace the "average" Premium Bond return for most savers.
If you do not need to use your ISA allowance to protect your savings from tax, standard easy-access savings accounts are also highly competitive right now. Keep in mind that a basic rate taxpayer can earn up to £1,000 in savings interest per tax year before paying tax, while a higher rate taxpayer can earn £500.
Ultimately, whether Premium Bonds are the right choice for you depends on whether you value the excitement of a potential tax-free jackpot over the security of a guaranteed monthly interest payment. Of course, it doesn't have to be an either-or decision. Many savers find that a blended approach works for them, combining the reliable returns of a traditional savings account with the thrill of a small amount of Premium Bonds.
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