National Savings and Investments is “pulling out all the stops” to attract savers’ cash as the state-owned bank battles to meet its £15billion target. In a bid to woo savers, NS&I has upped its Premium Bonds prize fund rate to 4.35% from 3.3% three months ago. The odds of winning have also increased from 23,000 to 21,000 to one for every £1 bond. So is now the best time for savers to buy? Caitlyn Eastell, Personal Finance Analyst at Moneyfactscompare.co.uk, told the Daily Express it depends.
She said: “NS&I appears to be pulling out the stops to attract savers’ cash. With a £15billion net financing target for 2026/27, it needs to raise funds to help meet the Government’s funding requirements. Having delivered just £1bn in the first quarter, NS&I has clear incentive to continue making their offerings more attractive. Boosting the appeal of Premium Bond’s could help draw in these fresh deposits and keep existing savers onside.”
Ms Eastell said Premium Bonds can make a fun addition to a wider savings strategy with the excitement of a potential tax-free prize. But she cautioned they should not be relied on as the only home for savings because returns are never guaranteed.
Moneyfacts’ expert added: “Whether now is the right time to invest in Premium Bonds ultimately depends on what savers want from their money. The prospect of a big tax-free prize may be appealing, but savers should consider whether the chance to win is worth giving up a predictable return.”
Other options include fixed-rate Cash ISAs which currently offer rates above 5% and easy-access ISAs with rates in excess of 4.50%. Ms Eastell said such accounts would give savers a more predictable return than Premium Bonds.
Independent Financial Advisor, Nouran Moustafa, from Roxton Wealth, said now is a much better time to consider Premium Bonds than it was a few months ago, but she would not automatically call them the best savings account.
Ms Moustafa said: “Premium Bonds become particularly interesting for people who value 100% government-backed security, easy access and tax-free prizes, especially where savings interest elsewhere could become taxable.” She added: “So yes, Premium Bonds are more attractive, but excitement should never be confused with guaranteed interest.”
Ross Lacey, Director of Fairview Financial Management, said Premium Bonds are a great way to save and his business always recommends keeping some money in cash or Premium Bonds to cover times when savers don’t want to dip into their pensions or investments when the stock market falls.
He added: “Although there are no guaranteed ‘prizes’, the rate of return for an average Premium Bond holder is not too dissimilar from a savings account. The main differences are prizes are tax free which is particularly attractive for Higher Rate and Additional Rate tax payers, and there’s also the potential for much higher returns, with two £1million winners each month for example.
“Over the longer term though, it’s worth considering other ways to grow savings, as neither Premium Bonds nor cash accounts will consistently keep pace with inflation.”
Harvey Dhillon, Founder and CEO of Zmartly, said Premium Bonds look better now than they did in the spring, adding: “But NS&I can cut the rate at any time, so nobody can promise this is the best moment to buy.” He added: “From April 2027, tax on savings interest rises in every band while prizes remain tax-free under current rules, and that matters most to higher earners. If your interest is already covered by your tax-free allowance, the tax case for Premium Bonds is much weaker.”
A NS&I spokesperson said Premium Bonds remain one of the nation’s favourite savings products and are a flexible way to save. They said the Bonds offer the excitement of potentially winning tax-free prizes every month, while providing 100% security backed by HM Treasury and easy access to withdrawals. The spokesperson added: “Every £1 Bond has an equal chance of winning in each draw, with millions of prizes paid out every month.”
In October’s Premium Bonds draw, a total of 137,483,797,618 £1 Premium Bonds were entered into the draw. Of that number, 6,546,849 tax-free prizes worth £498,378,775 were paid out, including two £1million prizes, 96 £100,000 prizes and 191 £50,000 prizes. As of March last year, £133.2billion was invested in Premium Bonds by 22.7 million customers.
