The findings are set to fuel fresh discussion about Britain’s most popular savings vehicle
Millions of savers who have held Premium Bonds for years may be missing out on thousands of pounds in potential returns, new research has revealed. Analysis by Fidelity International indicates that an individual who invested £5,000 in Premium Bonds a decade ago would now have approximately £6,190 – representing a rise of nearly 24%.
However, when inflation is factored in, the purchasing power of that money has actually declined. A sum of £5,000 from 2016 would need to have reached £6,992 simply to match the increase in living costs.
In comparison, the same £5,000 placed in a global stock market tracker fund could have climbed to roughly £15,900 during the same timeframe – representing a surge of approximately 218%. Meanwhile, a FTSE 100 tracker fund would have expanded to around £11,600, reflecting gains of about 132%.
These findings are set to fuel fresh discussion about whether Britain’s most popular savings vehicle is leaving risk-averse savers financially disadvantaged in the long run. Approximately one-third of the UK population holds Premium Bonds, the analysis shows, with typical savers retaining them for about 10 years.
The research also revealed that around 850,000 children under 16 own bonds, frequently purchased by family members as presents. Premium Bonds, operated by NS&I, don’t offer traditional interest payments. Instead, savers are entered into monthly prize draws with tax-free winnings.
Nevertheless, returns aren’t assured and rely entirely on chance. Fidelity has cautioned that while Premium Bonds can serve a purpose for emergency savings and short-term financial stability, keeping substantial amounts in them for extended periods risks inflation gradually diminishing their worth.
Jemma Slingo, pensions and investment specialist at Fidelity International, said: “Premium Bonds can play a useful role in a balanced financial plan. They offer capital security and tax-free prizes, making them a good option for short-term savings or an emergency fund.
“Where savers need to be careful is over longer time horizons. While your money is safe in cash terms, inflation can steadily erode its real value, and returns from Premium Bonds are uncertain as they depend on prize draws. Over time, that can add up to a significant opportunity cost compared to investing.
“Premium Bonds are a popular gift, but with such long time horizons, even small amounts invested in the stock market have much greater potential to grow,” she said. The research emerges as increasing numbers of savers reconsider where to place their funds following years of elevated inflation and fluctuating interest rates.
The NS&I website says bonds can be a good investment if you want:
- a chance to win tax-free prizes from £25 to £1 million
- easy access to your money
- to buy a savings gift for a child under 16

