National Savings & Investments (NS&I) has just upped its rates on Premium Bonds and savings products – but they are still below the best paying ISAs and other savings accounts.
From July, the Premium Bonds prize rate will be 3.8 per cent – after it had fallen from 3.6 per cent to 3.3 per cent in April.
The odds on winning are also better, down from 23,000 to one to 22,000 to one for each bond held.
So there should be an extra 322,000 prizes from the £60m pot.
While the moves were welcomed by money experts, they note that NS&I was still far below rivals when it comes to savers earning on their cash.
Sarah Coles, head of personal finance at AJ Bell, said: “It was starting to get a bit embarrassing for NS&I to have fallen quite so far behind the more competitive accounts in the easy access market. Cuts in April meant Premium Bonds were paying a prize rate of just 3.3 per cent, where easy access savers can get their hands on more than ten accounts without restrictions on withdrawals paying over 4 per cent.”
NS&I customers will also see increases to the variable interest rate for savings they hold in Direct Saver (3.45 per cent), Income Bonds (3.45 per cent), Direct ISA (3.8 per cent) and Junior ISA (3.7 per cent).
The best deals around are still paying 4.5 per cent, well above that level, while several regular savers and fixed-term deals pay even higher rates.
Andrew Westhead, NS&I Retail Director, said: “We regularly review our products to ensure they reflect current market conditions, and we’re pleased to be able to improve rates across five variable savings accounts today. This reflects changes in the wider savings market and helps ensure we meet our Net Financing target.”
Premium Bonds have been around since 1956 – people can hold up to £50,000 worth, with each £1 bond put into a draw where the prizes range from £25 to £1m.
Rachel Springall at Moneyfactscompare.co.uk says: “Savers who prefer to keep their pots with NS&I will be delighted to see rates increase, but it is worth noting that the top rates on the market are over 4 per cent on easy access accounts, with some top fixed accounts paying well over 4.50 per cent. However, there is no denying that some savers will forgo higher rates to have their money placed with the brand, as it is 100 per cent backed by HM Treasury.”
The savings market is presently in a state of flux. Since the Iran war began, the expectation has been that Bank of England interest rates might have to go up – which means savers should get better rates and borrowers more expensive mortgages.