Premium Bonds may be Britain’s most nostalgic savings product – millions of us have held them for decades, hoping for that lifechanging win.
But with rates falling and the odds lengthening from the April 2026 draw, many savers are now asking the same question: is it still worth holding on, or is your money better off elsewhere?
This guide breaks down what’s changing, what it means for your savings, and how to decide your next move.
What’s on this page?
The prize fund rate: This drops from 3.60% to 3.30%. This is the percentage of the amount of money held in bonds, that is paid back in prizes. You probably won’t make that much, as we’ll explain.
The odds: The chance of one single bond winning anything drops to from 1 in 22,000 to 1 in 23,000.
With 23 million savers (a third of the UK population) holding £135.7 billion in Premium Bonds, this is a massive blow. For many, the lure of the £1 million jackpot is strong, but the maths suggests you could be losing money in real terms compared to standard savings accounts.
Mark Hicks, director of active savings at Hargreaves Lansdown, says: “Premium Bonds hold a special place in people’s hearts with the opportunity to win up to £1m tax-free acting as a great incentive to pile your money in. However, the odds of winning anything just got even longer, from 22,000 to one to 23,000 to one, with the prize rate also being slashed to 3.30% – it serves as a timely reminder as to whether you can get more for your money elsewhere.”
The 3.30% figure is often misunderstood. It does not mean you will get a 3.30% return on your money.
Because the prize fund includes two £1 million jackpots and some other high-value prizes, the ‘mean average’ is skewed massively. The ‘median’ average return, which is what a typical person with typical luck will get, is much less. Most Premium Bond holders (around 62%) have never won a prize - that's 14.3 million people.
Laura Suter, director of personal finance at wealth platform AJ Bell, explains: “The Premium Bond ‘prize fund rate’ is intended to give savers some comparison with how the account compares to normal savings accounts...
“Clearly not everyone has ‘average’ luck, otherwise the prizes would be handed out equally to every saver. The fact that there are some very large prizes also skews the figures – as it means that for every person who wins £1 million or £100,000 there will be hundreds who win nothing.”
In short: Most people will earn significantly less than 3.30%.
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Almost certainly, yes. If you are looking for guaranteed returns, standard savings accounts currently thrash Premium Bonds.
Mark Hicks says: “Premium Bonds don’t pay out interest - their prize rate is more of a benchmark of average return for your money. However, the reality is that, if you don’t win anything, you don’t get anything at all. It’s well worth looking at the wider savings market to see what deals are available. Cash ISA rates remain incredibly competitive ahead of tax year end… Savers can also get above 4% by utilising fixed terms which are available across regular savings and Cash ISA accounts.”
The maths:
Premium Bonds: 3.30% variable rate (and you might win nothing).
Top savings accounts (cash ISAs and easy-access): Around 4% guaranteed.
On a £20,000 holding, switching to a 4.3% ISA guarantees you £860 a year. With Premium Bonds, you are crossing your fingers and hoping for the best.
Despite the rate cut, Premium Bonds aren’t useless. They may still serve a specific purpose for three types of savers. Are you one of them?
If you earn over £1,000 in savings interest (or £500 if you are a higher-rate taxpayer) outside of an ISA, you have to pay tax on it. Premium Bond prizes are always 100% tax-free.
If you have already used your £20,000 ISA allowance for the year, Premium Bonds are a place to park spare cash tax-efficiently.
Premium Bonds are backed by the Treasury, meaning your money is 100% safe up to the £50,000 limit. However, your money in other banks is also protected, and the protection level has recently increased.
Mark Hicks explains: “The fact that Premium Bonds are 100% backed by Treasury will still mean they remain popular, though it is fair to say that the Financial Service Compensation Scheme increased its protections to cover up to £120,000 per person per bank, building society and credit union from 30 November 2025 so many people will already be well covered.”
Unless you have more than £120,000 in a single bank, standard savings accounts are just as safe.
Let's be honest – a savings account will never make you a millionaire overnight. Premium Bonds might (although it’s very unlikely).
Mark Hicks says: “The lure of a big tax-free cash prize will still prove powerful for many, so Premium Bonds will continue to play a role in some people’s financial lives – it’s just important to regularly assess what else is out there and whether you can get more for your savings elsewhere.”
If you are buying bonds for grandchildren, consider if they really need the 'lottery' element.
Mark Hicks suggests: “For children with a long time horizon, it’s also well worth considering Junior ISAs as an alternative.” Junior ISAs can be either cash ISAs or investment ISAs.
He adds: “Growth and income is tax-free, like with Premium Bonds, but if you invest the money for 5-10 years or more there is real growth potential, and your money stands a much better chance of growing notably faster than inflation.” You should always remember that investments can go down in value as well as up.
James Norton, head of retirement & investments at Vanguard Europe, says: “Premium Bonds can play a useful role as part of a wider savings strategy, particularly for people who value security and accessibility. But when money is being set aside for the long-term, it’s important to consider whether it could be working harder through investment, particularly for those hoping to profit from the luck of the draw.
“This is particularly relevant where Premium Bonds are used by parents and grandparents to save some money for a child. Had they invested in a Junior ISA they could significantly improve the chances of building a sizeable pot of money.”
KEEP if you pay tax on savings interest, have maxed your ISA, and want the thrill of a potential jackpot.
CASH OUT if you want a guaranteed income, need to beat inflation, or have a smaller pot (under £5,000) where the odds of winning anything are vanishingly small.
The right choice for you will depend on your personal preferences. It’s worth speaking to a financial adviser if you have a lot of money in Premium Bonds and are not sure what decision to make.
Get your money moving with our great rate.
In partnership with NatWest. Interest paid monthly. Available to UK residents only, designed for people over 50.
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