National Savings & Investments (NS&I) is raising the Premium Bond prize rate to 4.35% for the September draw, one of the biggest boosts in the scheme's 70-year history, as it scrambles to attract savers away from more competitive fixed-rate deals elsewhere. The move comes after NS&I was set a Government target to raise an extra £15billion, plus or minus £4billion, in the year from April 1, but has fallen well behind after holders drifted towards richer guaranteed accounts, leaving the state-backed bank little choice but to sweeten its offer.

The rate rise, up from 3.8% last month and the second increase since April, takes prizes up 1.05 percentage points in total despite the Bank of England base rate holding at 3.75%. It means an extra £63million will be paid out next month, bringing the total prize pot to £497.3million across an extra 308,000 prizes, with fewer small £25 payouts and more big wins, including 434,921 more £50 and £100 prizes each, plus 12 more £100,000 prizes and 27 more £50,000 prizes, while the two monthly £1million jackpots remain unchanged. NS&I also raised rates on its fixed-rate Guaranteed Growth and Income Bonds for the fourth time this year, with Growth Bonds now paying between 4.81% and 4.85% depending on term.