Reacting to ‘Premium Bonds prize rate to rise to 4.35% – how do they compare?’, MoneySavingExpert, 18 August 2026. The underlying figures in this piece are taken directly from NS&I's own published rates and its historical rate table, checked on 19 August 2026.
Premium Bonds are about to have their highest prize fund rate since early 2024. NS&I is raising the prize fund rate, improving the odds and paying out more than last month.
4.35% is the size of the prize pot, not a return. Nobody is credited 4.35%. The money is paid out as prizes ranging from £25 to £1 million. Most prizes are £25, so a holder who wins only £25 prizes receives about a third of the advertised figure. A savings rate tells you what you will get; a prize fund rate tells you the size of the pot before it is shared out.
What changed
From the September 2026 draw, NS&I's prize fund rate rises to 4.35% and the odds improve to 21,000 to 1 for every £1 Bond. That is up from 3.80% and 22,000 to 1, which applied from the July 2026 draw. NS&I's own historical table shows how much this has moved in a single year: 3.30% in April 2026, 3.80% in July, now 4.35% in September. Prizes stay tax-free, the minimum stays £25, the maximum holding stays £50,000.
The rise runs against the direction of the Bank of England's Bank Rate, which has been 3.75% since 18 December 2025. NS&I has an annual amount it needs to raise for the Treasury, and raises rates when it is behind. This rate moved because of NS&I's funding needs, and it can move back for the same reason.
Why a holder winning £25 prizes gets about a third of the headline
The prize fund is 4.35% of the total value of all Bonds in the draw. The number of prizes is fixed by the odds — one prize per 21,000 Bond numbers per month. Divide the pot by the number of prizes and you get the average prize: about £76.
The average prize is not the usual prize. Most of prizes paid out every month are the £25 minimum, and the £76 average is dragged upwards by two £1 million prizes a month and the tiers of £100,000, £50,000 and £25,000 beneath them. If your wins are all £25, you receive £25 for every £76 of average, which is 33% of the advertised rate. That is about 1.43% a year, not 4.35%.
Illustrative, using NS&I's published September 2026 odds of 21,000 to 1. Prize outcomes are random and yours will differ.
- Bond numbers held: 10,000 — every £1 is its own entry.
- Expected prizes per month: 10,000 ÷ 21,000 = 0.48.
- Expected prizes per year: about 5.7.
- If every one is the £25 minimum: about £143 a year, tax-free — an effective 1.43%.
- What 4.35% on £10,000 would be: £435.
The £292 difference has not disappeared. It is being paid to the small number of holders who win the large prizes. Occasional bigger wins lift the figure above £143, but the gap to £435 comes from how prizes are distributed.
For comparison, on the same £10,000 over a year, NS&I's own Direct ISA at 3.80% tax-free pays £380, its Direct Saver at 3.75% pays £375 gross, and its one-year Guaranteed Growth Bond at 4.82% pays £482 gross but locks the money away. All rates as published by NS&I on 19 August 2026.
Small holdings
The lower your holding, the further your likely experience drifts from the headline. Work NS&I's 21,000 to 1 odds through for someone holding £1,000: the chance of winning nothing in a given month is about 95%, and compounded across twelve draws, the chance of winning nothing whatsoever in an entire year is about 56%.
A person with £1,000 in Premium Bonds is more likely than not to finish the year with exactly £1,000. Meanwhile the same £1,000 in an account paying 3.80% would have produced £38 with certainty. At £5,000 the picture improves — about a 6% chance of a blank year — and at the £50,000 maximum you would expect roughly 28 prizes a year, though still overwhelmingly £25 ones.
What Premium Bonds offer
First, security. NS&I is backed by HM Treasury, so 100% of your money is protected however much you hold. That matters above the Financial Services Compensation Scheme limit of £120,000 per person per firm, which rose to that level on 1 December 2025. That matters for someone holding a large cash sum after a house sale or an inheritance.
Second, the prizes are tax-free and never touch your Personal Savings Allowance — £1,000 of interest for a basic-rate taxpayer, £500 for higher-rate and £0 for additional-rate, per GOV.UK for 2026-27. That helps a higher-rate taxpayer already using their £500.
Third, the monthly prize draw can encourage people to leave the money alone. Our guide on building a savings habit covers this.
What the money is for
The useful question is what this money is for.
If the money is your emergency fund, access and certainty matter, and at £1,000 there is a 56% chance of no prize in a year. If it is money for something dated — a car in eighteen months, a wedding, a deposit — you need to know what it will be worth, and Premium Bonds cannot tell you. For surplus money above a funded emergency fund, the trade is a lower expected return for the chance of a larger prize.
Cash ISAs are also tax-free, and the ISA allowance is £20,000 for the 2026-27 tax year. Our guide to how ISAs work explains the allowance.
Two things to do this week
1. Check for unclaimed prizes. NS&I holds prizes nobody has claimed, often because holders moved house without updating their details. The official NS&I prize checker takes about a minute and needs only your holder's number. Check any Bonds bought for children too.
2. Work out your tax position on savings interest. Find out whether you are paying any tax on savings at all. The GOV.UK guide to tax on savings interest sets out the Personal Savings Allowance and the starting rate for savings, which gives up to £5,000 of tax-free interest to people whose other income is under £17,570.
What is still uncertain
The prize fund rate is variable and NS&I can change it at any time — it has already moved three times in 2026, from 3.30% in April to 3.80% in July to 4.35% in September. NS&I sets these rates against a funding target agreed with the Treasury, so the next move depends on how its inflows are running rather than on anything the Bank of England does. The September draw takes place at the start of September, and NS&I publishes the full prize breakdown alongside it, showing how many prizes are £25 and how many are larger.
Where coaching ends and advice begins. Understanding what a prize fund rate is, working out what your money is for, and knowing your own tax position — that is coaching, and it is all here. Recommending a specific savings product, provider or investment for your circumstances is regulated financial advice. Buzz Money Coach is a trading style of Buzz Accounting Ltd, which is not authorised to give regulated advice and does not. Where you need it, we say so and can introduce you to Equity & General, authorised and regulated by the FCA (No. 474163) — entirely optional, with no obligation, and E&G pays us a commission on introductions that convert. For free, independent guidance, MoneyHelper is the government-backed service. If money is a worry right now, start here instead — StepChange and National Debtline give free help today.
Premium Bonds pay a higher prize fund rate this September than in August, but they do not pay a fixed 4.35%. Decide which of your money needs certainty and which can go into a monthly prize draw. Our Financial Freedom Score looks across your savings and other areas of your money.