It’s no secret that winning the Premium Bond jackpot is about as likely as Christmas Day being the hottest day of the year. However, winning a smaller prize is far from impossible. So with savings rates so dire, is it worth trying your luck with Premium Bonds?
How do Premium Bonds work?
Premium Bonds are offered by National Savings & Investments (NS&I), the government’s savings provider. A draw takes place every month, with prizes ranging from £25 to £1 million.
You can buy Premium Bonds online, by post or over the phone. While Premium Bonds are worth £1 each, if you want to buy any, you must purchase a minimum of £25. You can hold up to 50,000 Premium Bonds.
You must hold your Premium Bonds for at least a whole month before being entered into the following month’s draw. For example, if you buy bonds at any time in November, you’ll be entered into the prize draw for January. For this reason, many suggest buying Premium Bonds at the end of the month to avoid your cash sitting in an account that can’t win for several weeks.
To check whether you’ve won, you can use the NS&I online prize checker tool.
What prizes are on offer?
The following Premium Bond prizes were up for grabs in September 2021:
- 3,189,365 £25 prizes
- 30,445 £50 prizes
- 30,445 £100 prizes
- 5,616 £500 prizes
- 1,872 £1,000 prizes
- 107 £5,000 prizes
- 55 £10,000 prizes
- 22 £25,000 prizes
- 11 £50,000 prizes
- 5 £100,000 prizes
- 2 £1 million prizes
This means there are 3,258,845 prizes in total. While this may seem like a lot, there are over 100 BILLION Premium Bonds in the UK.
What are your chances of winning?
Your chances of winning a £25 prize with a single bond is one in 34,500. While this may seem like poor odds, remember that you can hold a maximum of 50,000 bonds. This means that if you hold the maximum possible number of bonds, you can expect to win at least £25 every month, based on average luck.
However, your odds of winning more than £25 in the draw are far worse than 1 in 34,500. To scoop just £50, you’ll have to beat odds of over one in 1.6 million. To bag £100, it’s almost one in three million.
Think that’s bad? Your odds of bagging the £1 million prize with a single bond is around one in 56 million!
Are Premium Bonds a better bet than a normal savings account?
It may seem as though Premium Bonds are a better bet than normal savings accounts at face value. That’s because Premium Bonds have a payout rate of 1%. In comparison, the highest easy-access savings account rate is just 0.67% AER variable, via Shawbrook Bank.
However, it’s worth remembering that the vast majority of those holding Premium Bonds win nothing. In other words, for every £100,000, £500,000 or £1 million winner, there have to be lots and lots of losers. That’s why it’s worth taking NS&I’s 1% payout figure with a pinch of salt.
That being said, the more Premium Bonds you hold the higher your expected rate. According to PremiumBondsPrizes.com, if you have 10,000 Premium Bonds, your expected winnings rate is 0.75%. If you hold 25,000 bonds you can expect to earn 0.8%, while if you hold the maximum 50,000 bonds, you can expect 0.9%.
With this in mind, if you have a lot of savings and would rather give low savings rates a miss, then buying Premium Bonds may not be a bad decision.
How else can you boost your savings?
If you’d prefer not to chance your luck with Premium Bonds or settle for 0.67% in an easy access savings account, then you may wish to lock away your cash in a fixed-rate savings account for a higher return.
Right now, you can earn 1.35% AER fixed for one year with Zopa. If you’re happy to lock away cash for longer, then United Trust Bank pays 1.82% AER fixed for three years, or 2.01% AER fixed for five years.
For more options, see our top-rated fixed-rate savings accounts.
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About the author
Karl is a writer specialising in investing and personal finance content. He regularly contributes articles on savings, bank accounts, mortgages, and loans. He was previously a Personal Finance Writer for MoneySavingExpert.
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