Premium Bonds: Chances rise of winning leading prizes

The chances of winning some of the biggest Premium Bonds prizes have increased to their highest level for more than 15 years.

Greater competition to attract savers has led National Savings and Investments (NS&I), to improve the odds to 21,000 to one.

There will be 90 prizes of £100,000 compared with 77 at present, and up from just six in May last year.

However, there will still only be two winners each month of the £1m jackpots.

"These rate increases will help ensure that our savings products remain attractive to customers, whilst ensuring that we continue to balance the needs of savers, taxpayers and the broader financial services sector," said Dax Harkins, chief executive of NS&I, which is entirely owned by the Treasury.

Rising interest rates have fed through to better returns for savers, although providers remain under pressure from regulators and MPs to offer better rates.

Premium Bonds offer the chance of winning tax-free money through monthly prize draws instead of regular interest. It is the UK's most popular savings product, with about 22 million investors.

However, savers have been drawn towards better returns from other savings providers recently, despite eight increases in the generosity of Premium Bonds in the last year.

The effective interest rate of 4.65% is still lower than than leading rate of 5% on easy-access accounts, and even better returns on other deals which lock-in savers' money.

"It was inevitable that NS&I would increase rates as rising competition in the savings market means it has fallen out of favour with savers who would prefer guaranteed rates elsewhere," said Laura Suter, head of personal finance at investment platform AJ Bell.

The changes mean there will be an estimated 181 Premium Bonds prizes of £50,000 given in September, up from 154 in August.

While there will be more big money prizes on offer, the estimated number of £25 prizes will go down from 1.7 million in August to 1.03 million in September.

Overall, there will be 5.79 million prizes in September, an increase of more than 269,000 when compared with August. and up from 3.4 million in May last year.

The returns on other NS&I products are also improving.