NS&I is soon to change the rules for Premium Bonds
Premium Bonds savers may want to make a change(Image: Getty)
Premium Bonds holders may want to check over the rules around the savings scheme, as significant changes are on the horizon. A financial expert has shed light on how the prize draw operates ahead of key rule changes to the NS&I programme.
NS&I recently told customers that both the prize fund rate and winning odds for Premium Bonds will decrease from the April draw onwards. The prize rate is set to drop from its current 3.6 percent to 3.3 percent, whilst the chances of winning for each £1 Bond will worsen from 22,000 to one to 23,000 to one.
Tim Grimsditch, managing director at financial advice firm Unbiased, explained the implications for bondholders. He said: “With rates being cut again, Premium Bonds are becoming less rewarding for many savers.
“For those with smaller balances, the odds of seeing frequent or meaningful wins are already low, so it’s worth considering whether that money could earn more in a competitive savings account.” One attractive aspect of Premium Bonds is the possibility of claiming substantial prizes in the monthly draw.
You could potentially win £50,000, £100,000, or even the coveted £1million jackpot. That said, you can go years or even decades without any wins. Also the overwhelming majority of prizes amount to modest sums such as £25 or £50.
Only one way to improve your odds
Mr Grimsditch advised careful looking at other places to build your savings, even for those who have recently secured wins. He explained: “Although a few recent wins may create the impression that the bonds are ‘working’, every monthly draw is completely independent.
“Even a couple of wins doesn’t improve the odds next time. The only way to increase the chance of winning is to hold more Bonds, and that money could be earning guaranteed returns elsewhere.”
The maximum holding for Premium Bonds stands at £50,000, yet even with this sum invested, savers might get superior growth through traditional savings accounts. Mr Grimsditch explained: “Cashing in Premium Bonds sooner and moving the money into a fixed‐rate account means earning guaranteed interest straightaway, rather than sticking with longer odds and a reduced prize fund.
“With many savings rates still above 4 percent, holding on could lead to lower overall returns whilst better opportunities are available.” For those holding the £50,000 maximum in Bonds, transferring this into a savings account offering 4 percent would generate £2,000 in interest annually.
Even a more modest £10,000 held in Bonds could yield £400 in interest at 4 percent. According to Mr Grimsditch, switching funds into a savings account could prove more beneficial for those looking to build wealth over time.
Review your options
He said: “If steady growth is the priority, it’s worth reviewing other options. Premium Bonds can deliver the occasional boost, but long‐term, consistent progress is usually achieved through savings or investment accounts that offer guaranteed rates and clearer returns.”
If no prizes are won, the value of your holdings remains static, effectively diminishing in real terms as inflation erodes your purchasing power. The savings expert said to think about your long-term financial objectives, in deciding whether or not to cash in your Premium Bonds.
He explained: “When working towards major financial goals such as retirement, homeownership or building long term savings, making choices based on short term returns or the possibility of a win can make it harder to stay on track. If savers feel unsure of the best place to put their money, speaking with a qualified financial adviser can help clarify how Premium Bonds fit within the bigger picture, and ensure every part of their finances is working to support their future.”