The Premium Bonds prize draw includes two £1million jackpot prizes
Premium Bonds savers have been urged to consider if the savings scheme is right for them. Rather than get an interest rate, Premium Bonds go into a monthly prize draw. Each £1 Bond has an equal chance of being paired with a prize, with the odds of winning currently at 22,000 to one.
But the reality is you can go many months or even years without winning a prize. And even if you do win something, most of the prizes are for very small amounts, such as £25. Ian Futcher, financial planner at wealth firm Quilter, said: “Premium Bonds continue to hold strong appeal for many savers. While the odds of a big win are slim, the security of their capital and the thrill of potentially winning a tax-free prize each month is enough of a draw for many who hold them.”
He said that Premium Bonds may suit people later in life who want a secure place to hold their cash. Provider NS&I is backed by the Treasury, so all your holdings are protected. But others may want to avoid the savings scheme.
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Mr Futcher said: “For those focused on growing their savings, especially younger people with a longer investment horizon, Premium Bonds will not be the most effective option. Interest rates on traditional savings products and fixed-term bonds have improved, meaning there are far more competitive ways to earn a guaranteed return.
“For long-term savers, especially those looking to beat inflation, options like stocks and shares ISAs or a diversified investment portfolio may offer better growth potential.” He warned that people may hold on to their Premium Bonds simply out of habit or in hopes of one day bagging a big win.
Each prize draw includes two jackpot prizes for £1million and other big cash prizes for amounts such as £100,000 and £50,000. The wealth expert said: “It’s important to remember that while they’re low risk, they’re also low reward for most people.
“If you’ve gone a while without a win and you feel you could benefit from better interest rates elsewhere, it might be worth reviewing your savings strategy.” Mr Futcher also said with the end of the year coming up, now is a good time to think about changing your savings portfolio.
Now is a good time to review your savings
He said: “Taking stock of your finances towards the end of the year is always a good idea, this could include switching to higher-yielding savings accounts or perhaps taking the first step towards investing. Where possible, you should seek the support of a professional financial adviser who can help make sure your plans are aligned with your future goals and that your money is held in the most appropriate way to help you achieve them.”
The prize fund rate for Premium Bonds has dropped several times this year, and is currently at 3.6 percent. But with the Bank of England recently holding the base rate at 4 percent, this has raised hopes the prize rate could stay the same or even go up,
Mr Futcher said: “Should the Bank of England’s base rate remain at 4 percent for a while longer or unexpectedly rise then we could potentially see this rate increase. But given the Bank is widely expected to cut rates further in the coming months, it seems relatively unlikely that NS&I will make the prize fund rate more generous.”
NS&I say there are many reasons to choose Premium Bonds. Their website states: “Most banks only guarantee your savings up to £85,000. We’re the only provider that secures 100% of your savings, however much you invest.
“We’re backed by HM Treasury and we’ve been helping people save for over 160 years. Today, over 24 million customers save with us.
“We created Premium Bonds and you can only get them from us. Open an account and you could win big in our monthly prize draw.”