NS&I has made some major changes to Premium Bonds
The rules for Premium Bonds have changed(Image: Getty)
Premium Bonds customers may be reconsidering their position following major changes to the scheme by NS&I. A savings specialist has discussed what alternative options you could look at as the probability of winning has fallen.
Starting with the April draw, the odds of securing a prize have worsened from 22,000 to one to 23,000 to one. Additionally, the prize fund rate has dropped from 3.8 per cent to 3.3 per cent. Tim Grimsditch, managing director at financial advisory firm Unbiased, spoke about who might still find Premium Bonds an attractive savings vehicle despite the declining odds. He explained: “Premium Bonds remain a fully safe place to hold cash, backed entirely by the UK Government, which is their biggest strength.
“But they still shouldn’t be seen as a reliable way to grow your savings, as many people receive far less than the average return and may go long periods without any wins at all.” The monthly draw offers substantial prizes including £50,000, £100,000 or even a £1million jackpot.
However, savers can experience prolonged periods without any wins whatsoever, and the overwhelming majority of prizes awarded are modest sums of £25 or £50. Mr Grimsditch laid bare the situation confronting bondholders.
Hard to get meaningful returns
He said: “For people with smaller Premium Bond holdings, the recent changes make it even harder to see meaningful returns, because the odds have worsened and typical payouts already tend to fall below what you’d get from straightforward savings accounts.
“For those with larger holdings or saving toward specific goals, the changes also weaken the case for keeping big sums in Premium Bonds, since the reduced prize pool and less frequent wins mean anyone looking for steady, predictable returns can no longer rely on frequent winnings.
“In both cases, if reliability and progress toward financial goals is what savers are looking for, they are better off moving at least part of their money to accounts offering guaranteed returns.” Savers can hold a maximum of £50,000 in Premium Bonds.
Many people set up their account so any prize money they collect is automatically reinvested into buying more Bonds. This strategy boosts your prospects of securing future prizes.
What alternatives to Premium Bonds could I look at?
For those thinking about withdrawing their Bonds, the expert advised acting promptly. He said: “Those considering cashing in may find that moving money sooner into a fixed-rate or high-interest account allows guaranteed interest to begin immediately, rather than waiting to see how the new prize rate affects returns.”
On the flip side, if you are thinking of investing further in Premium Bonds, his guidance was clear: “Anyone considering buying more should review their broader goals first.
“Adding money to Premium Bonds increases the chance of winning but does not guarantee stronger returns than a standard savings product.”