NS&I announces higher Premium Bonds prize fund rate and interest rises on four savings accounts
Premium Bonds holders are to get a better chance of winning a prize from this summer, as NS&I raises the prize fund rate for the first time in almost three years and improves the odds of a payout on every £1 bond.
Premium Bonds overhaul
From the July 2026 draw, the prize fund rate on Premium Bonds will increase from 3.3% to 3.8%, and the odds of winning a prize for each bond will shorten from 23,000 to one to 22,000 to one. NS&I, the government-backed savings bank, estimates the changes will inject an extra 322,000 prizes into the monthly draw, swelling the total prize pot by £60 million to more than £436.8 million. In all, over 6.2 million prizes worth a combined £436.8 million will be up for grabs in July.
The shift is the first boost to the Premium Bonds prize fund rate since September 2023, when it stood at 4.65%. Since then NS&I had cut the rate repeatedly: from 4.65% to 3.6% in the autumn of 2024, and then to 3.3% in April 2026, following the Bank of England’s base rate cut in December. The new rate of 3.8% partially reverses those cuts but remains below levels seen two years ago.
More significant than the headline rate, however, is the change in how prizes are distributed. The proportion of £25 prizes will fall from 47% of all prizes to 37%, while the number of higher-value awards will rise markedly. There will be 12 more £100,000 prizes, taking the total to 83, and 24 more £50,000 prizes, bringing the total to 167. The number of £100,000 and £50,000 prizes in the May 2026 draw was 71 and 143 respectively. Similarly, £25,000 prizes will increase from 285 to 334, and £10,000 prizes from 712 to 835. The two £1 million jackpot prizes remain unchanged.
“NS&I is clearly looking to make Premium Bonds more attractive again,” said Greig Bingham, head of financial modelling at Broadstone, a financial services consultancy. “Alongside the rise in the prize fund rate and improved odds, one big positive is the shift in the make-up of the prizes. A greater share of the prize fund is being directed towards higher-value prizes, which could make the product feel more rewarding for savers fortunate enough to win.”
Despite the improvements, the odds of winning any prize remain slim. Research by Vanguard suggests roughly 62% of Premium Bonds holders have never won a prize in the monthly draw. Premium Bonds do not pay guaranteed interest; if a bondholder wins nothing in a given month, the real value of their deposit falls with inflation. The maximum holding is £50,000 per individual, and all NS&I products are 100% secure because they are backed by HM Treasury, unlike bank and building society deposits, which are protected by the Financial Services Compensation Scheme (FSCS) up to £120,000 per person per authorised firm.
Savings accounts: rates rise but lag the competition
From 14 May 2026, NS&I has also raised interest rates on four of its savings accounts. The Direct Saver, a taxable easy-access account, rises from 3.05% gross/AER to 3.45% gross/AER, with a minimum £1 deposit and interest paid yearly. Income Bonds, another easy-access account that pays interest monthly, rises from 3.01% gross/3.05% AER to 3.4% gross/3.45% AER, with a minimum £500 deposit. The Direct ISA, an easy-access tax-free account, rises from 3.5% AER to 3.8% AER on a minimum £1 deposit. And the Junior ISA, a cash Isa for children, rises from 3.55% AER to 3.7% AER.
While these increases will be welcomed by existing NS&I customers, the new rates are not market-leading. Rachel Springall, finance expert at Moneyfactscompare, said: “Savers who prefer to keep their pots with NS&I will be delighted to see rates increase, but it is worth noting that the top rates on the market are over 4% on easy-access accounts, with some top fixed accounts paying well over 4.5%.”
For example, Yorkshire Building Society’s Triple Access eSaver pays 4.2% interest, and Chase’s easy-access savings account offers 4.5% AER, including a boosted 2.25% AER for the first 12 months. OakNorth Bank’s Easy Access Tracker pays 4.14% AER on balances from £1, with interest paid monthly. In the cash ISA market, Trading 212’s Cash ISA pays 4.51% AER, including a 0.91% bonus for the first year, while Skipton Building Society’s Junior Cash ISA offers 3.8% AER, slightly above NS&I’s Junior ISA at 3.7%. All of these alternatives are FSCS-protected up to £120,000.
NS&I’s rates have fluctuated in line with its financing targets. In late 2023 the bank offered a record 6.2% on its one-year Guaranteed Growth and Income Bonds, but those products were withdrawn after it met its fundraising goals. Once NS&I reaches its target, rates typically become less competitive.
Expert analysis: weighing security against returns
The contrast between Premium Bonds and standard savings accounts boils down to luck versus certainty. A saver putting money into a savings account earns a guaranteed return, while a Premium Bonds holder depends on the monthly draw. Even with the improved odds, only those with large holdings are likely to achieve returns close to the prize fund rate, as financial commentator Martin Lewis has noted.
Premium Bonds do offer tax-free winnings, which can be valuable for higher earners who have already maxed out their ISA allowance and personal savings allowance. But a Cash ISA also provides tax-free interest without the uncertainty, and it does not consume the annual ISA allowance. “The other perk to Premium Bonds is that any winnings are tax-free,” Bingham acknowledged. “They can be a useful addition to your wealth portfolio after you’ve maxed out your ISA allowance and personal savings allowance. Your savings are also 100% secure with NS&I.”
Inflation remains a concern for all savers. The current prize fund rate of 3.8% is below the rate of inflation in some recent periods, meaning that even winners may see their real returns eroded. For those prioritising capital preservation and a guaranteed return, traditional savings accounts – even with rates that are not the very highest on the market – offer a safer path. As Springall put it, savers should always compare current offerings to ensure they are getting the best possible return for their money.
