Surprise boost for Premium Bonds

THE UK's 23m Premium Bond holders are set to enjoy a surprise boost to the savings product's prize fund.

The Government has changed a 50-year-old rule that meant increases in winnings on the bond prize fund no longer have to be delayed by three months.

The shake-up means there will now be two increases on 1 October, lifting it from 2.8% to 3.2%, and boosting the value of the prize fund by more than £4m to £65m.

Originally, the prize fund rate was due to go up to 3% on 1 October, a result of the June base rate change, and then again to 3.2% on 1 December, due to the August hike.

The double rate increase also means NS&I can double the number of £100 prizes to more than 160,000. The move is also in response to feedback from customers who told the bank they like to win smaller prizes more often.

NS&I will also give away an extra £100,000 prize - taking the total to five - and one more £25,000 prize, taking the total to 18.? Four more £10,000 prizes will also be awarded, taking the total to 18.

'NS&I is always trying to improve what it offers customers and removing the old-fashioned three month notice period brings Premium Bonds into line with the majority of our other savings and investments,' said Gill Cattanach, NS&I marketing director.

However, the bank has come under fire for failing to pass on the full base rate rise to the prize fund each time.

The base rate has risen from 3.5% to 4.75% since November - 125 basis points. Over the same period, Premium Bond returns have risen from 2.15% to only 3.2%, an increase of 105 basis points. NS&I points out that it spared savers two rate cuts when the UK base rate was falling last year.

A PREMIUM bond holder from Oxfordshire was announced today as this month's £1m winner. It was the first Oxfordshire winner since the top prize was introduced in 1994. The jackpot number was purchased in January 2004 and the winner holds the maximum £30,000 in bonds. The winning number was 78MQ415013.

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