Budget 2014: £1m Premium Bond prize pot doubled
Individuals will now be able to invest an additional £10,000 in premium bonds from 1 June 2014, taking the limit to £40,000, the government announced today.
The investment limit then rises to £50,000 in 2015/16, chancellor George Osborne announced in his Budget speech.
The government also said the number of monthly £1 million premium bond prizes will double from one to two a month, with effect from the August 2014 prize draw.
Jane Platt, chief Executive of National Savings & Investments (NS&I), which operates premium bonds, said: "Premium Bonds are unique and hugely popular with our customers."
"Increasing the number of £1 million prizes per month to two, will add to the excitement that our savers might win a big prize in the monthly prize draw and, increasing the limit on the amount that can be invested in Premium Bonds is something that hasn't been done for over a decade."
It is also launching a range of new savings products, including a "pensioners' bond" – a savings bond for people aged over 65. This will pay 2.8% over one year or 4% over three years.
NS&I is able to launch these products, as well as raise the premium bond investment limit and prize pot by accepting a larger influx of funds in the next two to three years.
The organisation said the odds of winning a monthly £1million jackpot prize will double, but did not say what the odds on winning the prize would be for someone holding the new amount of either £40,000 or £50,000 worth of premium bonds.
A form of National Savings Certificate, premium bonds are effectively gilt-edged securities: you loan your money to the government and, in return, it pays you for the privilege with a guarantee it will return your capital at a specified date. Where premium bonds differ is that the interest payments (currently 1.5%) are pooled and paid out as prize money and you can get your cash back within a fortnight, with no risk. Launched by Chancellor of the Exchequer Harold Macmillan in his 1956 Budget, every single £1 unit has the same chance of winning and in May 2011, 1,772,482 winners (from a total draw of 42,539,589,993 eligible bond numbers) shared £53,174,500. The odds of winning are 24,000 to 1 and the maximum holding is £30,000 per person but it remains the only punt in which you can perpetually recycle your stake money.