Premium Bonds: Expert discusses chances of winning prize draw
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Last month, National Savings and Investment (NS&I) confirmed it was raising the prize fund rate for its Premium Bonds product. Following this hike, Premium Bond’s prize fund rate has been increased from one percent to 1.40 percent. This change was implemented as of June 2022’s prize draw and will continue at the same rate for the foreseeable future.
Due to this change, many Premium Bonds holders are likely to be wondering whether their odds of winning the top £1million prize have improved.
Unlike other savings accounts, no traditional interest is earned on Premium Bonds as there is instead a monthly prize draw for cash prizes.
The most someone can win from Premium Bonds in a single month is £1million, with two jackpot payouts usually given out to two bond holders a month.
Among the other sizeable cash prizes someone can win through NS&I’s investment product are £100,000, £50,000 or £25,000.
Prior to the prize fund rate rise, the odds of each £1 Premium Bond number winning a prize was 34,500 to one.
After the NS&I’s decision to hike the rate, the odds have now changed to 24,500 to one in a boon for savers.
This means that bond holders will see their odds improving of taking home one of the cash prizes each month.
NS&I estimated that the hiked prize fund rate would result in an extra 1.4 million prizes paid out in last month’s draw.
As part of this latest rate hike, the Government shared its reasoning for increasing the Premium Bonds rate in this way.
John Glen, the Economic Secretary to the Treasury, outlined why the prize fund rate rise will “help put money” in the pockets of savers.
Speaking last month, Mr Glen said: “Premium Bonds have offered the public an alternative way to save since they were first introduced in 1956, and next week marks 65 years since ERNIE drew the first Premium Bonds prize winners.
“I’m delighted to see NS&I raise the prize fund rate on Premium Bonds, which will see an additional 1.4 million prizes worth £40million being returned to savers each month – helping to put money in the pockets of the nation’s savers.”
Ian Ackerley, the NS&I’s chief executive, noted that bond holders are set to “benefit” in the long-run following the introduction of the new prize fund rate.
Mr Ackerley explained: “The new prize fund rate ensures that Premium Bonds are priced appropriately when compared to the interest rates offered by our competitors.
“It also ensures that we continue to balance the interests of savers, taxpayers and the broader financial services sector.
“Premium Bonds customers will benefit from the chance to win a further 1.4 million tax-free prizes each month, as well as the peace of mind that customers get with 100 percent of their NS&I savings being backed by HM Treasury.”
However, Sarah Coles, a senior personal finance analyst at Hargreaves Lansdown, highlighted that while odds of winning a prize have improved, bond holders should not be expecting to take home £1million jackpot anytime soon.
Ms Coles said: “It’s worth knowing the chances of a win too. While the chance of any win at all with a £1 bond is 24,500, in May, the chances of winning £1million were one in 58.91 billion – which is vanishingly small.
“Even after the prize rate changes, there will still only be two million pound prizes, so the odds of winning a million haven’t improved.
“In fact as more people buy more bonds, unless the number of million pound prizes increases, the odds will get worse.”
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