NS&I has revealed it will make changes to Premium Bonds from September in a boost to players.
The savings giant said the odds will shorten to 21,000 to one, from 22,000 to one.
The prize fund rate will increase for the September draw to 4.35%, up from 3.80%.
Compared with the August draw, it is estimated there will be more than 308,000 further prizes in September, with the prize pot increasing by around £63 million to more than £497 million.
There are expected to be 12 additional £100,000 prizes, 27 more £50,000 prizes and an extra 51 £25,000 prizes next month.
The estimated number of £1 million prizes the 22 million-plus Premium Bond holders can potentially win will remain the same, at two.
While the number of prizes is increasing, there will be fewer chances to win small £25 prizes in September, with the estimated number of prizes at this level dropping from 2,289,959 to 1,717,659.
Premium Bonds have the security of being 100% backed by the Treasury.
Instead of paying interest, there is an annual prize fund rate that funds the monthly draw for tax-free prizes.
Andrew Westhead, NS&I retail director, said: “Not only is NS&I boosting Premium Bonds from September, but from today we are also increasing interest rates for our British savings bonds, plus our direct saver and income bonds.
“This is to ensure we reflect current market conditions and help to meet our net financing target.
“This is the second time this year we have been able to increase Premium Bonds prize fund rate and shorten the odds.
“The September Premium Bonds draw is now expected to have more than 6.5 million tax-free prizes worth over £497 million.
“Premium Bonds continue to offer over 22 million savers of all ages the monthly excitement of tax-free prizes with 100% security backed by HM Treasury, and the flexibility to withdraw at any time.”
NS&I’s variable rate direct saver and income bonds accounts have increased from 3.45% AER (annual equivalent rate) to 3.75% AER.
Both new and existing customers with maturing British savings bonds will also see improved rates.
From Tuesday, one-year bonds rates have increased from 4.72% AER to 4.82% AER.
Two-year deals have increased from 4.70% AER to 4.81% AER.
Three-year bond rates have risen from 4.68% AER to 4.83% AER, while five-year bond rates have increased from 4.75% AER to 4.85% AER.
Sarah Coles, head of personal finance at AJ Bell, said: “NS&I is pulling out all the stops to attract the cash it needs.
“It has decided there’s no point tinkering around the edges: a raft of rates have to rise – including pulling the trigger on the big gun of Premium Bonds.”
Ms Coles described NS&I’s new one-year bond rate as “unusually competitive” and close to the most competitive options, adding: “Given that this is the most popular term to fix your savings over, it’s clearly hoping to persuade rate-chasers to make a small compromise in order to secure a rate that’s 100% backed by the Treasury.
“There are better deals on offer elsewhere – especially if you are fixing for longer – so if the rate is the most important thing to you, you can find a more rewarding home for your money.
“However, getting so close to the competitive deals could be enough to tempt some savers into the NS&I fold.”
Ms Coles added that banks generally have been “competing hard” for savers’ cash, saying: “NS&I is pushing for a net financing target of £15 billion this financial year. So far inflows haven’t been much to write home about.”
She said the provider therefore “had to do something fairly dramatic at this stage”.
Here are the values and numbers of prizes in August followed by the estimated numbers for September, according to NS&I:
£1,000,000, 2, 2
£100,000, 83, 95
£50,000, 165, 192
£25,000, 331, 382
£10,000, 827, 954
£5,000, 1,654, 1,909
£1,000, 17,347, 19,892
£500, 52,041, 59,676
£100, 1,931,214, 2,366,135
£50, 1,931,214, 2,366,135
£25, 2,289,959, 1,717,659.
Caitlyn Eastell, a personal finance analyst at Moneyfactscompare.co.uk, said of Premium Bonds: “Despite the improved odds, they are a game of chance and the 4.35% shouldn’t be mistaken for a headline rate.
“With the cost of living continuing to weigh on household budgets, it’s understandable savers may not want to leave their returns to chance.
“The best easy access Isas pay over 4.50% and returns could be even higher if they’re willing to lock away their cash.”
She said of the bond rate increases: “While the latest hike has made their bonds more attractive, savers should still shop around.
“NS&I’s rates should be compared to the wider market as the highest paying fixed bonds now pay 5%. But savers will also need to pause and assess where the best home for their money is.”
