Premium Bonds are getting a boost - but are they worth it?

National Savings and Investments (NS&I), the government-backed savings bank, has raised its Premium Bonds prize fund rate. That takes the total monthly prize pot close to £500 million.

The prize fund rate rose from 3.80% to 4.35% from the September draw onwards, while also shortening the odds of winning from 22,000:1 to 21,000:1.

But does this mean you should plough more of your cash into Premium Bonds?

How do Premium Bonds work?

Premium Bonds are a savings product where your money doesn’t earn interest in the usual way. 

Instead, every £1 you hold is entered into a monthly prize draw. You then have the chance to win prizes ranging from £25 to £1 million. Those prizes are completely tax-free.

The draw takes place on the first of each month. The catch is that you’re not guaranteed a return. Some people win regularly, some win occasionally, and many don’t win at all. 

Either way, your original savings stay protected, and you can cash the bonds in whenever you like. However, the ‘return’ depends entirely on luck.

Premium Bonds don’t pay interest, so the prize fund rate is the closest thing they have to one. The prize fund rate shows how much prize money NS&I pays out across all Premium Bonds each year. 

That’s the figure which rose to 4.35% from the September draw.

However, that isn’t the amount you’ll receive - it’s the total paid out on all deposits.

What's changing?

In theory, a 4.35% prize fund rate means that for every £100 held in Premium Bonds, £4.35 is paid out annually in prizes, compared to £3.80 before.

What the prize fund rate increase means in practice is that there were about 308,000 more prizes in the September draw (and future draws) than in August. The total prize pot grew by around £63 million, to more than £497 million.

That takes the total prizes across the draw to more than 6.5 million. Broken down, that means: 

• 12 more £100,000 prizes;
• 27 more £50,000 prizes; and 
• 51 more prizes worth £25,000. 

At the smaller end, there'll be more than 2.3 million prizes worth £100 each.

It's the second time this year NS&I has sweetened the deal. It already raised the rate back in July from 3.3% to 3.8%, the first rise in almost three years.

Does the maths actually stack up?

On paper, the Premium Bonds prize fund rate is now pretty close to the best easy access savings accounts, which pay around 4.5% in September 2026. 

But the catch is that the prize-fund rate isn't a guaranteed return. Instead, it's an average worked out across every Premium Bond held.

That means most people will earn less than 4.35% in any given year, purely down to bad luck. Some savers will win nothing at all - that’s even worse luck. 

Data from a freedom of information (FOI) request earlier this year shows this to be true for small Premium Bond holdings. 

Less than 1% of all Premium Bonds prizes paid out between February 2025 and January 2026 went to accounts holding less than £1,000. Only about 6% of prizes went to savers with £10,000 or less.

So if you're sitting on a smaller balance - say a few hundred pounds - the odds of winning anything meaningful are pretty slim, even with the improved 21,000:1 odds. 

The bigger your holding, the more realistic it becomes that your actual return starts creeping towards that headline 4.35% figure. But there's still no guarantee.

How do Premium Bonds compare with savings accounts and ISAs?

If a guaranteed return matters more to you than the chance of a windfall, your money is probably better off elsewhere.

As of 16 September 2026, the best easy access savings account pays 5% (including a six-month bonus). The best one-year fixed-term deposit also pays 5%.

For Cash ISAs, the highest rate is 4.61% for an easy access account, and 4.76% for a one-year fixed rate. 

Remember, with an ISA, any interest you earn is tax-free. You can pay into ISAs up to the ISA allowance in each tax year. In 2026/27, that’s £20,000.

Basically, you can beat the Premium Bonds prize fund rate by putting your money in a  savings account offering a similar or higher interest rate. And, there’ll be no prize draw - you’ll simply receive your interest each month or year, depending on the account.

Listen to our podcast episode about whether you should buy Premium Bonds or save into a Cash ISA.

The case for sticking with Premium Bonds

That said, NS&I's offering comes with several things many providers can't match. 

Firstly, there’s safety, as all NS&I deposits are backed by HM Treasury. 

Although the maximum you can save in Premium Bonds is £50,000, you could also hold money in other NS&I products. Those savings are backed by HM Treasury too, subject to the individual product limits. 

It’s worth noting that regulated savings accounts are usually covered by the Financial Services Compensation Scheme (FSCS). That protects your savings up to £120,000 per person per banking licence.

But the tax-free element is where Premium Bonds can earn their keep. That’s particularly the case if you're a higher or additional rate taxpayer who has used up their Personal Savings Allowance. 

Basic rate taxpayers get £1,000 of savings interest tax-free each year. But that drops to £500 for higher rate taxpayers, and disappears entirely for additional rate taxpayers. 

If you have savings elsewhere that’ll go over the limit and you’ve used your entire ISA allowance, Premium Bonds could help you shield some of your returns from tax.

And don't forget that you can withdraw your cash at any time. That means Premium Bonds can work well as a place to keep money you might need in a pinch - think an emergency fund or sinking funds.

There’s also the obvious appeal of the small chance of winning a life-changing prize. The opportunity of drawing one of the two monthly £1 million jackpots might tempt you into choosing them over regular savings.

The case for cashing them in

What Premium Bonds won't do is protect your spending power. If you don’t win much, there's a chance your money could lose value in real terms due to inflation - that’s how quickly prices are rising.

A competitive savings account or Cash ISA is far less likely to leave you falling behind. This is especially the case now that it’s relatively easy to find an account paying more than inflation, which was 3.1% in the year to August.

The verdict

The improved Premium Bonds rate is welcome news if you already hold them, narrowing the gap with top savings accounts. 

But Premium Bonds are still a gamble, not a savings account with a predictable return. So they might not suit everyone. 

If you want certainty, it can be sensible to shop around for the best fixed or easy access savings rate you can find. 

If you've already used your ISA allowance and Personal Savings Allowance, or you simply enjoy the thrill of the monthly draw, the new prize fund rate could make Premium Bonds a little more worth holding onto than they were last month.

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Emma Lunn is a multi-award winning Freelance Journalist. She's written about personal finance for 20 years, with a career spanning several recessions and their consequences. Her work has appeared in The Guardian, The Independent, The Telegraph and Money Week. Emma enjoys helping people learn to manage their money well, in both the short and long term.