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.