Premium Bonds savers may want to review their accounts as NS&I has announced changes to its rates. The new rates apply to several products available from the provider.
The Government-run savings giant has announced new issues of its British Savings Bonds with increased interest rates. This is despite many savings providers cutting their rates in recent months, as the base rate set by the Bank of England has been cut several times over the past year.
The new rates on the fixed rate bonds from NS&I include:
The rate on the postal only Investment Account is also increasing from 1 percent to 2.05 percent. Given the rate increase, NS&I was asked if it could increase the prize fund rate for Premium Bonds.
The prize fund rate for Premium Bonds was cut from the April draw, decreasing from 3.6 percent to 3.3 percent. The odds of winning for each £1 Bond also fell, from 22,000 to one to 23,000 to one.
An NS&I spokesperson said: “The interest rate increases
Savings trends
Sarah Coles, head of personal finance at investment platform AJ Bell, spoke about whether there could be changes to Premium Bonds given wider market trends. She said: “There are three things worth watching for. The first is what’s happening more broadly in the easy access market.
“NS&I has a duty to offer decent returns to savers – without being so generous that it’s a bad deal for taxpayers. It means big movements in the savings market can spark a prize rate change.
“Since NS&I last cut Premium Bond prizes, the best rates have fallen, but only very slightly, so that in itself is unlikely to encourage any change.” Another key factor is how the Bank of England moves the base rate, while the final question is NS&I’s net financing target.
Ms Coles explained: “We’re near the start of the financial year, so there’s unlikely to be a desperate need for swift action. NS&I recently pushed up the returns on fixed rate bonds, and it will be hoping this raises some extra cash.
“If this has the desired effect, there may be no need to do anything with the prize rate. What happens in the future remains in the balance. If competition in the easy access market hots up even more, the Bank of England raises rates or NS&I falls short of its target, we could see the prize rate rise.”