Is Investing in Premium Bonds Beneficial? Two-thirds of Investors Never Received a Prize
nearly a third of Premium Bonds holders in the United Kingdom have never received a prize from the scheme, as per data from wealth management app Dodl, which obtained figures through a Freedom of Information request.
There are approximately 14.4 million Premium Bonds holders who have yet to win a prize, accounting for approximately 63% of the total current holders, even though significant numbers of £50 and £100 prizes have been distributed since 2022. The smallest possible win stands at £25, with most wins in 2024 below £100.
The allure of the £1 million jackpot keeps Premium Bonds popular, with 22.7 million people currently holding them and £127.7 billion in total deposits at the end of 2024. However, unlike other savings options, Premium Bonds offer no guaranteed returns, despite being backed by the government-run National Savings & Investments (NS&I). The current variable prize fund rate is set at 3.8%.
In comparison, many cash savings accounts offer rates that beat inflation, ranging from cash ISAs to fixed-rate bonds, such as Moneybox Cash ISA which pays 5.71% - while inflation is at a mere 2.6%. AJ Bell regularly updates a list of the best-paying savings accounts to keep investors informed.
Bondholders who do win prizes tend to be repeat winners, with the majority of these winners having multiple victories during a given period. In the earnings period between March 2024 and February 2025, 5.1 million Premium Bonds holders claimed a prize, with 80% of these winners winning more than once. The average holding for these winners was £23,397 compared to the overall average holding of £5,406 across all Premium Bonds holders.
If the £5,406 that most holders have on average been invested in the Fidelity Index World global tracker fund 10 years ago, it would have grown to £14,794 today, according to AJ Bell's calculations.
Charlene Young, senior pensions and savings expert at AJ Bell comments, "The chance of winning any of the higher prizes (ranging from £5,000 to £1 million) remains virtually non-existent. The market currently offers many cash accounts, including tax-free ISAs, awarding rates greater than the Premium Bonds estimated prize fund rate of 3.8%. This means that holders may benefit from exploring alternative savings options to optimize their returns."
- Many cash savings accounts, such as cash ISAs and fixed-rate bonds, offer interest rates that exceed the 3.8% prize fund rate of Premium Bonds, making them a potential alternative for investors seeking higher returns.
- Unlike Premium Bonds, some investments, like the Fidelity Index World global tracker fund, provide guaranteed growth over time, as evidenced by the hypothetical growth of £5,406 investments from a decade ago.
- If one were to invest the average Premium Bonds holding of £5,406 in the Fidelity Index World global tracker fund a decade ago, it would have grown to £14,794 today, potentially yielding a higher return than the Prize Bonds accumulated over the same period.
- Pensions, as another form of finance, should be considered when planning personal-finance strategies, as they offer long-term savings advantages and tax benefits that help ensure a secure financial future.
