For the fourth time this year, the prizes paid out on premium bonds have been improved. From the August draw, 4% of the total amount invested will go into the prize fund each year, and the odds of winning a prize have improved slightly, from 24,000- to-1 to 22,000-to-1.

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National Savings and Investments (NS&I) has again decided to boost bigger prizes and keep the number of £25 prizes much the same. But don’t get too excited. The chance of winning a million pounds has not changed, and even if you own the maximum £50,000 bonds there is only an even chance of getting it once every 100,000 years! You should win £500 about once in four years and £1,000 every 13 years (again, that’s if you have the maximum holding). But bigger prizes stretch into the distant future – over a century to have an even chance of £5,000 and more than a millennium for £50,000.

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I give the figures for those with £50,000 bonds because more than a million people have that maximum, accounting for nearly half of all the bonds held. With that amount you can now expect around 27 prizes a year, divided roughly equally between £25, £50 and £100 – an annual total of £1,600. These are averages and you will find months with nothing and months with more. The expected return on your money from those three prizes is 3.2% tax-free, equivalent to a 4% return for basic-rate taxpayers on taxable interest and 5.33% for higher-rate taxpayers.
Premium bonds are best for people who can put in the maximum and pay higher-rate tax.

Other NS&I rates have also risen. Income bonds and Direct Saver accounts now pay 3.4% taxable. You can put up to £1 million in income bonds and £2 million in Direct Saver, and it is all guaranteed by the Government. If you prefer to chase the best rates on the market, you can earn 4.35% on instant access from Shawbrook Bank and 6.1% on a one-year bond from First Save. Up to £85,000 is protected by the Financial Services Compensation Scheme.

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Current best buy savings rates are updated daily at Savings Champion; go to savingschampion.co.uk.

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