Premium Bond Prize Rates Increase to 3.7% - Andy Clever Cash Explains
- Premium bond prize rate increases to 3.7% from 3.3% for the July 2023 draw.
- The increase means a higher likelihood of winning larger prizes, but no guarantee of a 3.7% return.
- The distribution of prizes changes, with more chances to win bigger prizes and fewer £25 prizes.
- Andy Clever Cash advises considering higher-paying savings accounts for guaranteed returns.
- Tom Church of LatestDeals.co.uk suggests weighing the risks and rewards before investing in premium bonds.
In a recent YouTube video, Andy Webb from Be Clever With Your Cash, discusses the latest increase in the premium bond prize rate. As of the July 2023 draw, the rate will be 3.7%, up from 3.3% in the previous draw. This marks the sixth increase in just over a year.
But what does this mean for savers? According to Andy, the new rate doesn't guarantee a 3.7% return. The prize rate represents the average luck of earning prizes throughout the year, but it doesn't take into account the possibility of winning lower or higher amounts. This is the nature of premium bonds - it's a gamble. As Andy explains, "you could very well walk away with nothing at all."
To understand the impact of the rate increase, Andy breaks down the distribution of prizes. The top prize of £1 million remains the same, with only two winners per month. However, there are slight increases in the number of prizes for amounts such as £100,000, £50,000, and £25,000. These increases come at the expense of the £25 prizes, which have decreased in number.
While the odds of winning remain the same, the chances of winning a larger prize have improved. For those with larger amounts invested, there's a possibility of getting closer to the 3.7% return. But as Andy points out, there are no guarantees.
To put it in perspective, Andy compares premium bonds to other savings accounts. Currently, easy-access savings accounts are offering around 4%, and one-year fixed accounts can go up to 5.7%. These rates provide a guaranteed return, unlike premium bonds. Andy advises putting money in a normal savings account if you have smaller amounts or if you're not likely to go over your personal savings allowance.
However, there is one advantage to premium bonds - tax benefits. Any prizes won are tax-free, making it an attractive option for higher-rate taxpayers who have exhausted their personal savings allowance. But for most people, Andy suggests considering other savings accounts that offer better returns.
Tom Church, Co-Founder of money-saving community LatestDeals.co.uk, agrees with Andy's assessment. He advises consumers to carefully consider their options before investing in premium bonds. "While the rate increase is welcome news, it's important to remember that premium bonds are a gamble. If you're looking for a guaranteed return, exploring other savings accounts might be a better option," says Church.
The increase in the premium bond prize rate may sound appealing, but it's crucial to understand the nature of the investment. While some may benefit from the higher chances of winning larger prizes, others may walk away empty-handed. It's essential to weigh the potential returns against the guarantees offered by other savings accounts before making a decision.
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