Are Premium Bonds Worth It?
Updated: Sep 19
When you’re trying to decide whether or not premium bonds are worth it, the most important thing to consider is whether or not you can afford to lose the potential interest you would have made on the money invested, had you put it in a standard savings account.
Premium bonds are essentially state lottery tickets, although you don't lose your money each month even if you don't win a prize.
If you do choose to buy premium bonds, here are some tips on how to get the most value out of them in order to protect your hard-earned money from being wasted on low returns that could have been earned elsewhere:...
Don’t Put All Your Eggs in One Basket
Premium bonds are a unique and exciting way to invest in your future, but they can also be quite risky.
For example, if you’re looking for ways to generate passive income or save up for a house deposit, premium bonds may not be your best option.
Since premium bonds don't offer a guaranteed interest rate, it is possible that you don't win or earn anything for months or years on end.
Premium bonds are certainly worth looking into, especially if you have large sums of cash sitting in an online savings account—but always consider other options first if they pay more interest. You don’t want to put all your eggs in one basket!
What Is a Premium Bond?
Premium bonds are a type of savings account offered by the UK government. When you buy a premium bond, you can win part of a prize fund, usually set at about 1% - 1.5% .
Each month a prize draw happens, and you may or may not win a prize.
Premium bonds can be purchased for as little as £25 (about $30) and can go up to £50,000 ($63,500).
Premium Bond Prizes
In 2022, £98 million in prizes were won on Premium Bonds each month. But, how much do you need to invest in order to win one of these prizes?
While it's impossible to know for sure, as there are no guarantees when it comes to investing with Premium Bonds.
Statistics show that you need to invest just over £34,500 in order to have a chance at winning a prize of £25 or more per month.
If you want even better odds, you’d need to put down about £50,000 in order for there be a 2/1 chance that your bond will pay out some sort of prize, but most likely a £25.
Premium Bond Prize Draw Details
Prize Fund Interest Rate 1.0%
Odds of Winning 1 in 34,500
Total eligible investment £117,819,813,615
Prize Fund £98,183,175
Number of prizes 3,415,068
Value of Prize Number of Prizes
£25 3,343,185 (98%)
How to Hold Premium Bonds
Premium bonds are a great way to save, and good fun, but if you’re wondering how to hold premium bonds, you may be missing out on some better opportunities.
To make sure premium bonds are worth it for you, it's important to understand how these work in relation to other investing strategies.
Premium bonds' convenience and accessibility comes at a price – low interest rates that can quickly put your savings behind when compared with other methods and inflation.
Once you know more about premium bonds, you’ll be able to decide whether or not they’re right for your investment goals.
Where Can I Buy Premium Bonds?
The most common place to buy premium bonds is at National Savings and Investments (NS&I), which is part of Her Majesty’s Treasury. You can visit their website to see their current rate, or call 0300 5000 000 if you want a quote over the phone.
Savings bonds are also available at other banks and building societies, but will be at different rates depending on how much each provider charges for commissions.
For example, Barclays currently offers a rate of 2.6% for saving bonds worth £50,000 to £100,000—but their rates start from 3% above that threshold.
There are also online marketplaces such as National Savings Direct that help consumers purchase government-backed savings products directly from NS&I.
Premium Bonds can be worth it
While some people may find it challenging to decide whether or not premium bonds are worth buying, one thing is clear: it pays to do your research first!
There are many ways to win and lose money with these bonds; that's why it's important to know exactly what you're getting into before signing up for them, but you have to be in it, to win it as they say!
Strategies for Winning Big Prizes – But Not Very Often!
So what are your chances of winning a major prize with Premium Bonds? In short, they're not very good. In 2022, there were 2 prizes of £1 million or more. That's a 2 in 118 billion chance of winning!
There are also 6 prizes of £100,000 and 11 prizes of £50,000, but you are most likely to win just £25 which accounts for 98% of the prize fund.
That said, you can win two or three times per month if you're lucky.
Are there any Strategies for winning the Premium Bond Jackpot ?
The only way to increase your chance of winning a big premium bond prize is to simply buy more bonds.
The more Premium Bonds you own, the greater your chance of winning.
Look at the average distribution of prizes over a year with a £50,000 holding in the picture below.
So it may not be worth your while trying to become a millionaire if you would only save £5,000 or £1,000.
Be aware that some people have held premium bonds for 50 years or more and never one a single penny!