Premium Bond Double Jackpot Starts

Premium Bond Double Jackpot Starts.

National Savings and Investments (NS&I) has today introduced the planned second £1 million jackpot to the monthly Premium Bonds prize draw.

In addition the overall prize fund rate will increase from today, 1 August 2014. From the August draw onwards:

• There are two £1 million jackpots
• The annual prize fund rate increases from 1.30% to 1.35%
• They will allocate 7% of the prize fund to higher value prizes, 5% to medium value prizes and 88% to lower value prizes (previously 5%, 4% and 91% respectively)

Comment

Whilst premium bonds are attractive for the jackpot prize.

The reality is that the actual pay out rate for the prize fund of 1.35% tax free is not that attractive. This means if you hold the maximum amount for investing i.e. £40,000 per adult (minimum £100), the return is likely to be 1.35%.

Compare this to bank deposits and ISAs:

• 50% tax payer would need a cash deposit interest rate of 2.7% to equal the return on Premium Bonds.
• 40% tax payer would need a cash deposit interest rate of 2.25% to equal the return on Premium Bonds.
• 20% tax payer would need a cash deposit interest rate of 1.69% to equal the return on Premium Bonds.

Our view is that premium bonds are more attractive for 50% Additional Rate Tax payers and 40% Higher Rate Tax Payers. Most 20% Basic Rate Taxpayers could achieve higher returns in a bank or building society account.