OVER 22million Premium Bond customers are set to get a boost from July as rates are set to rise.
National Savings and Investments (NS&I) has confirmed that rates for the draw will increase to 3.80%.
Bond holders will also see the chance of prize improved as the odds of a single £1 bond winning will go up to one in every 22,000 from one in every 23,000.
It comes after the rate was cut to 3.3% down from 3.6% in last April’s draw.
The government- backed bank said that compared to May’s draw it is estimated that there will be 322,000 extra prizes in July.
The prize pot is also increasing by over £60million.
From July there are expected to be 12 additional £100,000 prizes, 24 more £50,000 prizes and an extra 49 £25,000 prizes.
An extra 407,061 customers will also have a chance of winning a lesser prize of £100, while an extra 501,460 customers are expected to win £25.
Andrew Westhead, retail director at NS&I 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.”
Premium Bonds are a UK government-backed savings product from NS&I where your money earns no interest.
Instead, each £1 bond is entered into a monthly, tax-free prize draw to win prizes ranging from £25 to £1million.
If you are keen to enter, you can buy Premium Bonds over the phone, online or by post.
Once you own some you can buy more via direct debit on the National Savings and Investments website. You need to be over 16 to buy them.
But Rachel Springall, finance expert at Moneyfactscompare.co.uk, warned: “The main drawback to Premium Bonds is that they don’t pay interest, so your deposit erodes in real terms due to inflation, and winning is all about luck.
“Premium Bonds do not pay a regular income, so a savings account could be a better choice to provide a regular income from a nest egg.”
How do Preimum Bonds work?
BY JAMES FLANDERS, CHIEF CONSUMER REPORTER
Premium Bonds work like a giant, Treasury-backed tombola.
Instead of earning guaranteed interest, you buy £1 bonds (minimum £25, maximum £50,000) and each one is an entry into a monthly draw.
While your money is 100 per cent secure with HM Treasury and every prize is tax-free, your actual returns are entirely down to luck.
This is because NS&I adjusts its rates based on the wider market, and as interest rates are falling, the average return on Premium Bonds also drops.
And as they’re government-backed, they can’t dominate the savings market with a higher return rate.
However, because they are Treasury-backed, Premium Bonds are one of the safest investments you can make.
This reassures savers who want to stash their money and avoid risk but enjoy the excitement of being in with a chance of winning a jackpot.
Most people with £1,000 in Premium Bonds win absolutely nothing, as you need to be among the luckiest 40 per cent of investors just to secure a minimum £25 prize.
Despite this, Premium Bonds are the UK’s biggest savings product, with 22.7million people stashing a whopping £134billion in them.