Are Premium Bonds a no-brainer now the rate has been boosted to 4.35 per cent from the next draw in September?
It depends on who you ask.
For nearly 20 years, I have written about the savings product from National Savings and Investments – and typically, they attract a marmite reaction in the comment section from readers.
Some of you adore them. The chance to win £50,000, £100,000 or even £1million tax-free, without ever losing your stake is a huge draw.
Some of you have a stormy relationship with them, citing a lack of wins and that money would be better off elsewhere for a guaranteed return.
And of course, there are plenty of conspiracies, from only newer bonds winning big to ensuring you have logged in each month for ‘luck’.
Additionally, many bemoan a lack of prizes from bonds held for years – but often, these are small amounts.
Simply put, with the £50,000 limit – introduced in 2015 – there are more than a million people that have the maximum amount. That just makes them far more likely to win. Sorry.
Bond bonanza: Tens of millions of us hold Premium Bonds… to a varying degree of luck
Personally, I like them. Like any financial instrument however, I would never put all my eggs in one basket – or, talking Premium Bonds, all my eggs in one Ernie.
They are a great home for those who have taken care of their finances elsewhere. Done the boring, but essential work.
Filled Isa allowances, invested in stocks and shares, are making decent pension contributions and have an emergency pot of savings.
And on that note, there are worse places to hold an emergency pot of savings than Premium Bonds – they offer fairly swift access and the ‘in it to win it’ element makes them a touch more exciting.
If you are only holding a few hundred pounds in them, the likelihood of winning a decent prize is incredibly slim. Not impossible, but slim.
You only have to look through the winners of the top tier prizes over the past decade to see that.
Each month, I eagerly check in to see if I have won. I hold near the average pot, which sits at around £5,500.
At the end of 2024, I wrote about how I was ‘hodling’ Premium Bonds – that is slang for ‘holding on for dear life’.
That’s because, after holding them for nearly two years, I had won zero prizes. My luck has changed a little since and I’m sitting on a return of 3.87 per cent over the past year.
Sums worked out on the This is Money inflation calculator.
Kapow: The Premium Bonds underlying rate will rise to 4.35% from the next draw
Sure, my gains are hardly setting the world alight, but the trade-off is the little buzz of checking the results each month and the chance of winning a five, six or seven-figure prize, relatively risk free.
The risk being inflation, no guarantee of returns and better easy-access rates elsewhere.
And many people have decided to chase those better returns, fed-up of a subpar level of prizes from NS&I.
As a result, NS&I has had to put a rocket up the backside of Britain’s most popular savings product, moving the underlying rate from 3.8 per cent to 4.35 per cent, one of the biggest boosts it has ever made.
Earlier in the year, that rate was 3.3 per cent. It means the underlying rate is back at its third highest level in modern history. That will probably entice a chunk of savers back.
If it doesn’t, the rate is likely to go higher still as NS&I battles to claw in money from savers who have had their head turned elsewhere – and may be a little less inclined to have Premium Bonds, after the debacle earlier in the year over the way families of bereaved customers were treated, alongside ageing infrastructure.
For me, like most of my savings and investments, I will stay the course and keep Premium Bonds as a small fraction of my portfolio. I’ll probably divert a little bit of extra cash into them now the rate has improved.
They are one of two of my financial products I put in a bucket labelled ‘fun-ish’, – the other being my growing retro gaming investments (some of the returns on games and consoles bought just five years ago are astronomical). Physical media is the way forward in a move to make us all go digital.
Will I ever win a big prize with the Premium Bonds? Unlikely. But again, not impossible.
Like many things in life, it’s the hope that gets you – and it’s always nice to have a little bit of hope.
Will the Premium Bond boosted rate entice you back to Premium Bonds? And what are your favourite PB conspiracy theories? editor@thisismoney.co.uk
PS: This was first published at 6am in our weekly newsletter, packed full of the money stories you need to keep you in the loop. Sign-up below: