NS&I Premium Bonds statement issued as rate changes announced

The provider recently made major changes to the rules for Premium Bonds

Premium Bonds holders may want to revisit their savings plans as NS&I has set out some key changes to its account rates. The changes affect a number of its products.

The Government-backed savings giant has launched new issues of its British Savings Bonds, boasting higher interest rates. This is a notable move given that many savings providers have slashed their rates in recent months, with several Bank of England base rate cuts over the past year.

The updated rates on NS&I’s fixed rate bonds are as follows:

• 1-year Guaranteed Growth Bond – 4.5 percent (up from 4.07 percent)
• 1-year Guaranteed Income Bond – 4.5 percent (up from 4.07 percent)
• 2-year Guaranteed Growth Bond – 4.48 percent (up from 3.98 percent)
• 2-year Guaranteed Income Bond – 4.48 percent (up from 3.98 percent)
• 3-year Guaranteed Growth Bond – 4.45 percent (up from 4.02 percent)
• 3-year Guaranteed Income Bond – 4.45 percent (up from 4.02 percent)
• 5-year Guaranteed Growth Bond – 4.4 percent (up from 4.05 percent)
• 5-year Guaranteed Income Bond – 4.4 percent (up from 4.02 percent).

The postal-only Investment Account rate is also set to rise from 1 percent to 2.05 percent. Following these rate increases, NS&I was questioned on whether it would also raise the prize fund rate for Premium Bonds.

The Premium Bonds prize fund rate was reduced from the April draw, dropping from 3.6 percent to 3.3 percent. The odds of winning for each £1 Bond also worsened, falling from 22,000 to one to 23,000 to one.

An NS&I spokesperson said: “The interest rate increases announced yesterday reflect changes in the wider savings market and will help NS&I to meet its net financing target for 2026-27. NS&I reviews the interest rates on all of its products regularly and makes changes when appropriate to ensure it continues to balance the interests of savers, taxpayers and the broader financial services sector.”

Savings trends

Sarah Coles, head of personal finance at investment platform AJ Bell, shared her thoughts on whether Premium Bonds could see further changes given broader market shifts. 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 crucial consideration is how the Bank of England adjusts the base rate, while the final factor 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.”