Effective rates of return on Premium Bonds (July 2013)

NOTE: This post is more than 12 months old, and the information contained within may no longer be accurate.

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 ratePremium bond rateEffective rate
0% tax payer1.30%1.30%
10% tax payer (savings only)1.30%1.44%
20% tax payer1.30%1.63%
40% tax payer1.30%2.17%
45% tax payer1.30%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.

Other Articles

Share This Article

Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Share on whatsapp
WhatsApp
Share on email
Email

Are you ready to make informed decisions about your money?