Good news arrived yesterday for the 22 million-plus holders of Premium Bonds who will get one of the biggest boosts in the 70-year history of the cash prizes.

It’s no surprise – National Savings & Investments is desperate for our money.

Earlier this month, I predicted that the Government-owned bank would have no choice but to boost its Premium Bond prize rate and the amount it pays on its fixed-rate bonds and easy-access accounts.

NS&I has been tasked by the Government to bring in an extra £15billion – plus or minus £4billion – in the year from April 1. 

It is way behind this target, as savers have become disheartened with Premium Bonds, its best seller, and have abandoned their holdings for richer, guaranteed deals elsewhere.

The state-backed bank needed to pull something out of the bag because sales have been sluggish. It appears to have pulled out the big guns.

The Premium Bond prize rate has been given a huge boost to 4.35 per cent from the September draw, up from 3.8 per cent last month.

It is the second increase in the prize fund this year, up a total of 1.05 percentage points since April – despite the Bank of England base rate staying firmly at 3.75 per cent. 

The hike in the prize fund means that an extra £63million will be dished out in prizes in the draw next month compared with August, bringing the total to £497.3million. There will be an extra 308,000 prizes (6.5million in total).

Bondholders will also have a greater chance of winning a bigger prize, as there will be 572,300 fewer small £25 prizes up for grabs and more big prizes.

The biggest hike comes in the £50 and £100 prizes, up 434,921 apiece, with thousands more payouts of £500 and £1,000. There will also be 12 more prizes of £100,000 and 27 more of £50,000.

There will still be two £1million jackpots each month. But only time will tell if it’s enough to tempt savers back to Premium Bonds. If it’s not, the rate will have to go up again.

NS&I also hiked the rates on its fixed-rate Guaranteed Growth and Income Bonds, in the fourth boost this year and the second in three weeks. 

Customers with bonds maturing from August 18 will automatically get the new rate.

The fixed-rate Guaranteed Growth Bonds will pay 4.82 per cent for one year (up from 4.72 per cent), 4.81 per cent for two years (up from 4.70 per cent), 4.83 per cent for three years (up from 4.68 per cent) and 4.85 per cent for five years (up from 4.75 per cent). 

The one-year bond is just a whisker below the top rate of 4.85 per cent from MBNA Bank (part of the Lloyds Banking Group).

The Guaranteed Income bonds at 4.72 per cent, 4.71 per cent, 4.73 per cent and 4.75 per cent, for one, two, three and five years respectively, are also good – the one-year rate currently puts it as the top payer along with Vanquis Bank.

If you opt for a longer-term Guaranteed Growth Bond, watch out for your tax bill. They pay out at the end of the term rather than yearly, so interest earned during the whole term counts towards your personal savings allowance for the year it matures and is not spread across the years.

There is no such problem with the income version, which pays out interest each month.

Also up are NS&I’s variable-rate Income Bonds, popular with pensioners because they pay out interest monthly and give you easy access to your money. 

The rate is rising to 3.69 per cent from 3.4 per cent, while the rate on its Direct Saver, its easy access account, is increasing to 3.75 per cent from 3.45 per cent.

Its Direct Saver appeals to those with large sums, as all your money with NS&I is guaranteed by the Government, rather than the £120,000 limit with other providers under the Financial Services Compensation Scheme.