NS&I today announced that it was reducing the annual Premium Bond prize fund rate by 0.20% to 1.30%1 from 1 August 2013. The odds of each £1 Bond number winning a prize will change to 26,000 to 1 from 24,000 to 1.
NS&I Premium Bonds give you the chance every month to win £1 million. Instead of paying interest, NS&I hold monthly prize draws with a £1 million jackpot and over a million other cash prizes. As this is treated as ‘winnings’ tax is not normally due.
And because NS&I is backed by HM Treasury, you can be confident that all the money you invest in Premium Bonds is 100% secure whether or not you win a prize. But remember, inflation can reduce the true value of your money over time.
As the investments are normally free of tax, the latest 1.30% interest rate is worth an effective:
| Tax rate | Premium bond rate | Effective rate |
| 0% tax payer | 1.30% | 1.30% |
| 10% tax payer (savings only) | 1.30% | 1.44% |
| 20% tax payer | 1.30% | 1.63% |
| 40% tax payer | 1.30% | 2.17% |
| 45% tax payer | 1.30% | 2.36% |
| 60% tax payer (caused by loss of personal allowance at £100k) | 1.30% | 3.25% |
Note: Due to the random nature of winnings, an individual may receive much more or much less than the figures above, the interest rate represents the average expected winnings.
