Premium Bonds are getting a fresh boost from July, with NS&I raising the prize-fund rate to 3.8% and improving the odds of winning for millions of savers across the UK.
The change means the Premium Bonds prize-fund rate will rise from 3.3% to 3.8% from the July 2026 draw. At the same time, the odds of each £1 bond winning a prize will improve from 23,000-to-1 to 22,000-to-1, reversing the weaker odds that had applied since the April draw.
It is the first Premium Bonds rate increase in almost three years and comes after a run of cuts that had made the product look less attractive compared with standard savings accounts and cash ISAs. In September 2023, the prize-fund rate was 4.65%, before successive reductions pulled it down to 3.3%.
NS&I said the increase reflects changes in the wider savings market and its 2026-27 net financing target — the amount the Government expects the savings provider to raise from customers.
According to NS&I’s official interest rates page, Premium Bonds prizes remain tax-free, with the new 3.8% variable prize-fund rate applying from the July 2026 draw. The current rate remains 3.3% until the June draw.
The latest update may also be a response to changing saver behaviour. In May 2026, the number of eligible Premium Bonds entered into the monthly draw fell for the first time since June 2023, suggesting some customers had started moving money elsewhere after earlier cuts.
What the July Premium Bonds change means
The July draw is expected to include around 322,000 extra prizes, with the total monthly prize pot rising by more than £60 million. That means more savers should receive a prize, although there is still no guarantee of winning.
The two £1 million jackpot prizes will remain unchanged, but several higher-value prize categories are expected to increase. Estimated £100,000 prizes will rise from 71 in May to 83 in July, while £50,000 prizes are expected to move from 143 to 167. The number of £25,000 prizes is projected to increase from 285 to 334.
Mid-tier prize numbers are also set to climb. The number of £10,000 prizes is expected to rise from 712 to 835, £5,000 prizes from 1,425 to 1,667, £1,000 prizes from 15,046 to 17,472, and £500 prizes from 45,138 to 52,416.
There will also be a sharp increase in £100 and £50 prizes, both expected to rise from 1,538,283 to 1,945,344. However, the number of £25 prizes is estimated to fall from 2,808,135 to 2,306,675 as more of the prize fund is directed toward larger payouts.
Overall, the total number of monthly prizes is expected to rise from 5,947,523 in May to about 6,270,339 in July.
For savers who already hold Premium Bonds, the change is clearly positive. The odds are better, the prize fund is larger and there will be more prizes available. But the bigger question is whether Premium Bonds now beat ordinary savings accounts.
The answer depends on what a saver wants from their money.
Premium Bonds do not work like a normal savings account. They do not pay guaranteed interest. Instead, every £1 bond is entered into a monthly prize draw, with winnings ranging from £25 to £1 million. The prize-fund rate is an average across the whole product, not a personal return promised to each holder.
That distinction matters. A 3.8% prize-fund rate does not mean someone with £10,000 will reliably receive £380 a year. They might win more, they might win less, or they might win nothing.
By contrast, a savings account paying 4.5% gives a much clearer outcome. A saver with £1,000 in an easy-access account at that rate would expect about £45 in annual interest before tax, assuming the rate does not change. With Premium Bonds, the same £1,000 could produce no prize at all.
This is why Premium Bonds can look stronger in headlines than they feel in practice for smaller savers. The chance of winning a major prize is part of the appeal, but the chance of winning £1 million remains extremely small.
Tax-free prizes are still the biggest advantage
The strongest case for Premium Bonds is tax. All prizes are free from UK Income Tax and Capital Gains Tax. That can make them attractive for savers with larger balances, especially if they have already used their annual ISA allowance or are likely to exceed their Personal Savings Allowance.
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Basic-rate taxpayers can usually earn up to £1,000 of savings interest each tax year without paying tax. Higher-rate taxpayers get a £500 allowance, while additional-rate taxpayers do not receive a Personal Savings Allowance.
At savings rates of around 4.5%, a basic-rate taxpayer could exceed the allowance with a little over £22,000 in savings. A higher-rate taxpayer could reach the limit with just over £11,000. For those savers, Premium Bonds may become more useful because prizes are not taxed.
Even so, cash ISAs remain a serious competitor. They also offer tax-free returns, but unlike Premium Bonds, they pay interest. If a saver can get a cash ISA rate above 3.8%, the ISA may deliver a better outcome for anyone who values certainty over chance.
That makes Premium Bonds more of a specialist savings choice than a universal winner. They can suit people who want government-backed security, instant access, tax-free prizes and the possibility of a large payout. They are less suitable for savers who need predictable income or want to maximise guaranteed returns.
NS&I’s government backing remains an important comfort factor. Unlike standard bank savings, which are normally protected up to Financial Services Compensation Scheme limits, money held with NS&I is backed by HM Treasury. That has long made Premium Bonds popular with cautious savers.
However, savers should also consider service reliability. Swikblog has previously reported on NS&I Premium Bonds delays affecting thousands of families, showing why customer experience can matter as much as headline rates when people decide where to keep their cash.
The July rise improves the Premium Bonds story, but it does not change the basic trade-off. Savers are giving up guaranteed interest in exchange for tax-free prize draws and the possibility of a bigger win.
For some households, that trade-off will be worth it. For others, especially those with smaller balances or unused ISA allowance, a top savings account or cash ISA may still be the more reliable choice.
The 3.8% rate increase makes Premium Bonds more competitive than they were earlier this year. But savers should treat the headline rate as a guide to the size of the prize pot, not as a promise of personal returns.
Premium Bonds are better from July. Whether they are better for your money still depends on your tax position, savings balance and appetite for luck.
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