The ‘prize fund rate’ on premium bonds as well as the returns on the Direct Isa, Direct Saver, Income Bonds, Investment Account and Junior Isa are set to rise by 0.25%.
NS&I, which has 25 million customers, said it was passing on the benefits of the Bank of England’s recent base rate decision.
Which? Money takes a look at what the increase means for premium bond holders and other NS&I savers.
Premium bonds odds of winning a prize
Premium bonds don’t pay interest like a traditional savings account.
Instead savers are entered into a monthly draw for the chance to win tax-free prizes ranging from £25 to £1m.
The ‘annual prize fund rate’ on premium bonds – which determines how much money is issued as prizes every month – will rise from 1.15% to 1.40% on 1 December 2017.
The change will mean the odds of each individual £1 bond wining any prize in the monthly draw will improve from one-in-30,000 to one-in-24,500.
More premium bonds prizes than ever before
The boost to the prize fund rate will mean the number of prizes paid out each month will rise from around 2.3m to 2.9m – the highest level since premium bonds launched over 60 years ago.
This means there will be an extra 530,361 prizes on the table each month.
The number of £1m prizes will remain the same at two, but there will be more to go around in the £25 – £100,000 bands as the table below shows.
|Value of prizes||Number of prizes in November 2017||Number of prizes in December 2017 (estimate)||Increase in the number of prizes|
How much will other NS&I accounts pay?
NS&I will also be improving the rates it pays across its range of variable rate savings accounts by 0.25%.
This includes the Direct Isa, Direct Saver, Income Bonds, Investment Account and Junior Isa.
The table below shows what the accounts will pay from next month.
|Product||Current rate||New rate (from 1 December 2017)|
Why savers should still look elsewhere
Despite the increase the rates on NS&I savings accounts and premium bonds still fall short of beating inflation.
Savers need to find an account which pays at least 3% to protect their cash from losing value in real terms.
The Which? Money Compare tables allows you to search hundreds of savings accounts and cash Isa deals, so that you can find the best home for your cash.