Premium bonds: more chance of win as NS&I ups prize fund rate again

Savings bank estimates there will be 308,000 more prizes available in September draw than the month before

Premium bond holders will have more chances of winning prizes after changes announced this week.

From September there will be more prizes up for grabs for the 22 million people who hold the government-backed savings bonds.

This is the second time in two months National Savings and Investments (NS&I) has upped the premium bond prize fund rate, with one expert saying that the UK government’s savings bank is “pulling out all the stops” to attract more cash.

When you buy premium bonds, you are entered into a monthly prize draw in which you can win tax-free sums between £25 and £1m.

NS&I is increasing the prize fund rate – the proportion of the total invested amount paid out in prizes – from 3.8% to 4.35% a year with effect from September’s draw. It was previously upped from 3.3% to 3.8% with effect from July.

As a result of the latest change, the odds of winning with each £1 bond number will improve from 22,000-1 to 21,000-1.

NS&I estimates there will be 308,000 more prizes up for grabs in the September draw than there were in this month’s draw, with the prize pot increasing by about £63m to £497m.

Crucially, it has boosted the number of higher-value prizes and trimmed the number of £25 ones.

For example, the number of £100,000 prizes will rise from 83 this month to an estimated 95 in September, while the number of £50,000 payouts is going from 165 to 192. Meanwhile, the number of £25 prizes is being cut from just under 2.3m to about 1.7m.

One of the advantages of premium bonds is that they are tax free, which is particularly good for higher-rate taxpayers. If you held the maximum amount of bonds – £50,000 worth – and won the equivalent of 4.35%, that would amount to £2,175 tax free.

But one big downside is that they do not pay any interest and so are more vulnerable to inflation than other savings.

And while you could strike it lucky and scoop a life-changing sum, there is no guarantee you will win anything at all.

A freedom of information (FoI) request submitted by the investment platform AJ Bell earlier this year revealed that almost two-thirds (62%) of all premium bond holders had never won a prize .

If you want a guaranteed return, you should shop around for a decent bank or building society savings account. This week, there were easy-access savings accounts available paying up to 5% interest.

Premium bonds may be particularly appealing to savers who have already used up their Isa allowance or who are likely to go over their personal savings allowance, says Caitlyn Eastell, an analyst at the data website Moneyfactscompare.co.uk .

The personal savings allowance is the amount of interest you can receive from non-Isa savings accounts without having to pay tax on it. The allowance is £1,000 for basic-rate taxpayers and £500 for higher-rate ones (and up to £5,000 if you earn less than £17,570 a year).

But, says Eastell, despite the improved odds, premium bonds are a game of chance, and the 4.35% quoted figure “shouldn’t be mistaken for a headline rate”.

She adds: “With the cost of living continuing to weigh on household budgets, it’s understandable savers may not want to leave their returns to chance.”

Sarah Coles at AJ Bell says the prize fund rate has been upped by a decent amount and has been accompanied by a welcome shortening of the odds. But “it doesn’t change the fact that in an average month the average bond holder will win nothing”.

Those with smaller amounts are even less likely to see anything resembling a return, she adds. AJ Bell’s FoI revealed that fewer than 1% of all prizes handed out between February 2025 and January 2026 went to accounts with a holding worth less than £1,000.

Nevertheless, some experts believe cuts to the cash Isa allowance taking effect next spring may see more people put money into premium bonds.

Every tax year you can save up to £20,000 in one Isa or split the allowance across multiple Isas , putting as much of that as you want into either cash or stocks and shares.

But from 6 April 2027, the rules on where the money can go will change for anyone aged under 65. Instead of being able to put all of the money into a cash Isa, that element will be capped at £12,000 .