Premium bond holders could benefit from the scheme’s largest prize fund since March 1999 next month, government-backed bank National Savings and Investments (NS&I) has said.
Some £66 million extra will be available to bondholders following the 65-basis point hike in prize-fund rate, NS&I said on Tuesday, which will sit at 4.65% from September.
This follows the Bank of England’s 14th consecutive base rate hike last week, which raised UK interest to 5.25% and will mark the highest figure offered to premium bondholders in over 24 years.
“These rate increases will help ensure that our savings products remain attractive to customers,” chief executive Dax Harkins said.
“[They] show that we’re supporting savers up and down the country.”
Premium bonds offer a way for savers to buy government debt, with holders entered into monthly cash prize draws in return.
According to NS&I, the chances of winning a prize will increase from September, falling to 21,000 to one, with 269,000 extra awards available.
Given deposits are ultimately backed by the Treasury, investments in NS&I accounts are fully guaranteed, with such funds accounting for 9% of government debt as of 2017.
Though this offers more certainty, Money Saving Expert analysts noted better savings rates could indeed be found elsewhere.
Alongside this, the variation in the size of the awards offered, which sit between £25 and £1 million, will mean some people do not even benefit from the higher prize rate.
The flip side is the fact that NS&I premium bond awards are tax-free, the consumer group added, marking a potentially attractive prospect for those who face tax payments due to higher rates on savings accounts.