Euro Canals News

Your most trusted news channel

Customers with a Direct Saver and Income Bonds will see their rates increase from 2.3 percent to 2.6 percent. The interest rate on the Direct ISA is going up from 1.75 percent tax-free to 2.15 percent tax-free.

Those with have a better chance of winning a cash prize, as the prize fund rate increases from three percent to 3.15 percent, from the February draw.

The provider is also increasing the interest rate on its Junior ISA from 2.7 percent tax-free to 3.4 percent tax-free, boosting the savings of some 80,000 under-18 savers.

For those with Premium Bonds, the prize fund rate increases from three percent to 3.15 percent, from the February draw.

This is the fourth time the prize fund rate has been increased in recent months with the rate at its highest level in more than 14 years.

READ MORE: 

Chief Executive, Ian Ackerley, said: “Today’s changes will provide a welcome boost for savers of all ages across the country, with more Premium Bond prizes and some of the highest interest rates we’ve seen in over a decade.

“In a fast changing savings market, we’re committed to making sure our products remain competitive and our customers get a good return on their savings.

“Today’s changes ensure that we continue to balance the needs of savers, taxpayers and the broader financial services sector.”

The provider is also increasing the interest rate on its Junior ISA from 2.7 percent tax-free to 3.4 percent tax-free, boosting the saving for some 80,000 under-18 savers.

DON’T MISS

Laura Suter, head of personal finance at AJ Bell, said savers should “look at the small print” before investing in Premium Bonds as a saving option.

She explained: “Your odds of actually winning a prize haven’t improved and remain at 24,000 to 1 for each £1 bond you hold.

“But if you do win a prize you’re more likely to win a bigger sum, as the prize fund has been boosted.

“While lots of people are drawn in by the Government-backing and the tax-free nature of Premium Bonds, the majority of people would likely be better off opting for a standard savings account and getting a guaranteed interest.

“The top easy-access savings account currently pays three percent but you can get more interest with fixed and notice accounts.”

However, one advantage of Premium Bonds is they avoid pushing a person towards their Personal Savings Allowance.

Ms Suter said: “As interest rates rise the tax-free nature of Premium Bonds becomes more appealing as more people breach their Personal Savings Allowance.

“The Personal Savings Allowance means that basic-rate taxpayers can earn £1,000 interest on their savings before they pay tax, while higher-rate taxpayers can earn £500 and additional rate taxpayers get no tax-free limit.

“It means savers nearing the next tax bracket may face an unexpected tax hit when they breach the threshold.

“However, for many it makes sense to opt for a cash ISA or even pay the tax on the interest, rather than gambling on Premium Bonds and potentially earning no interest.”