Interest hike on Premium Bonds

New rules mean that investors in Premium Bonds will see two price hikes come into force today.

08:53 01 October 2004

New rules mean that investors in Premium Bonds will see two price hikes come into force today.

The changes will see twice as many 100 prizes given out by the government-backed savings scheme.

The increase in the prizes paid means the effective interest paid by National Savings & Investments has increased from 2.8 per cent to 3.2 per cent.

Changes mean that 65 million in prizes will now be distributed in the UK to the 23 million people who hold Premium Bonds

The increase in the 100 prizes comes after bond customers said they preferred winning smaller prizes more often, rather than the possibility of larger prizes.

After the changes 160,000 bonds a year will win 100, there will also be one additional 100,000 winner (taking the total to five), one more 25,000 winner (now 18) and four more 10,000 winners (now 18).

Originally the prize fund was due to rise to three per cent today and to 3.2 per cent in December - but changes to the rules mean that NS&I no longer has to give three month notice of changes to its prize fund.

Gill Cattanach, of NS&I, explained: "Removing the old-fashioned three month notice period brings Premium Bonds into line with the majority of our other savings and investments.

"This means customers will benefit sooner from the rate increase in the prize fund following the recent increase in the Bank of England base rate."