NS&I is increasing its Premium Bonds prize pot to £300m, the highest level in 15 years.
In a boost for more than 22 million savers, the prize fund-rates will be hiked from 2.2 to 3 per cent as of January next year, the highest rate since May 2008.
The government-backed institution is giving savers an extra £80million in higher value prizes up for grabs.
The odds of winning stay the same, at 24,000 to 1, but there will more than three times as many prizes worth £100,000, £50,000, £25,000, £10,000 and £5,000 available.
The change to the Premium Bonds prize fund rate is the third upwards change that NS&I has made this year, with the prize fund rate tripling from the 1 per cent it was at in May 2022.
These changes will see the January 2023 prize fund hit an expected £299,572,750.
Alongside this, effective from Tuesday 13 December, NS&I has also increased interest rates across several of its other variable products.
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More than 570,000 customers holding Direct Saver and Income Bonds will also benefit as the interest rate on both products increases from 1.8 to 2.3 per cent.
The rate on Direct Saver is now at its highest level since the account was launched in March 2010, while the interest rate on Income Bonds is the highest it has been since February 2009.
NS&I has also increased the interest rate that it pays on its Investment Account from 0.4 per cent to 0.6 per cent.
Despite this, all rates remain below current interest rates which sit at 3 per cent and are expected to be hiked this week.
Ian Ackerley, NS&I chief executive, said: “The change to the Premium Bonds prize funds rate, as well as the changes to Direct Saver, Income Bonds and Investment Account, will mean that our products are priced appropriately when compared to the rest of the savings market.
“This will also ensure that we continue to balance the interests of savers, taxpayers and the broader financial services sector.”
However, experts warn savers they need to be careful before putting all their money into a Premium Bonds account.
Sarah Coles, senior personal finance analyst, Hargreaves Lansdown: “Despite the average prize rate rising, there are absolutely no guarantees you’ll get anything like this, because the odds of a win are still 24,000 to one, so the average person with average luck will still win nothing.
“Because there’s no other interest on them, it means there’s a very good chance your stake will be increasingly eroded by runaway inflation.”
