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For decades, Premium Bonds have felt like a safe bet with a dash of fun – no risk to your capital and the chance of a windfall. Yet new research shows that for savers with modest holdings, the reality is far less rosy.
With prize odds worsening again in April, now might be the moment to ask whether your savings are quietly standing still.
Read on to get a realistic idea of your chances and find out if moving your money elsewhere could make you better off.
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British savers can’t get enough of Premium Bonds, with around 23 million of us now entering the monthly draw for tax-free cash prizes.
The odds of winning a prize will drop from one in 22,000 to one in 23,000 from April, when the prize rate is reduced from 3.6% to 3.3%.
These odds refer to your chance of winning any prize for every £1 bond that you hold. So that the more bonds you have, the more entries you’ll have in the draw and the greater your chance of a win.
But new figures have revealed just how low your chance of winning could be, even if you have bought hundreds, or even thousands, of pounds worth of bonds.
How small bond holders are missing out
According to a freedom of information request from AJ Bell, fewer than 1% of prizes paid between February 2025 and January 2026 went to savers with less than £1,000 in bonds. Only 6% of prizes were paid to savers with balances below £10,000.
Over half (53%) of prizes went to savers who had invested £50,000 – the maximum amount.
The average balance of bond holders who had never won a prize was £128.91.
Laura Suter, director of personal finance at AJ Bell, says: “The allure of Premium Bonds resides in the potential for holders to win a prize up to a maximum of £1 million, but many of those with money in the accounts will never win – or see a return on their money at all. There are more than 14 million premium bond holders yet to win a prize big or small, making up nearly two-thirds of all account holders.”
Although the ‘prize rate’ might suggest that the average bond holder will achieve similar returns to a savings account, that’s not the case. The prize rate is simply the amount of money invested in bonds that’s paid out in prizes.
Because the prize rate is influenced by very small number of people winning large amounts, most people don’t achieve that rate. Your return ultimately comes down to luck: some lucky bondholders will win big, but many more will win nothing at all.
Claire Stinton, senior personal finance analyst at Hargreaves Lansdown, says: “That means your savings aren’t actually earning any returns. It’s like buying a lottery ticket where your money isn’t at risk, but you’re also not getting richer unless your numbers come up. Meanwhile, inflation is quietly and slowly eroding the purchasing power of your money – so in real terms, your money could be going backwards”
Personal finance experts have long said that most savers will be better off keeping money in a competitive savings account that pays a guaranteed return.
But Alice Haine, personal finance analyst at Best Invest, says that it’s easy to understand why Premium Bonds are so popular.
“The thrill of a possible windfall plays perfectly into British culture. Many people enjoy a flutter, and Premium Bonds can feel like a low-risk bet because you always retain the money you originally paid in to enter the prize draw.”
While it’s the savers with the most bonds that statistically win the most, occasionally smaller bond holders can strike gold. She adds: “One winner from Outer London won a whopping £100,000 in March 2025 with a bond holding of just £14.”
Still, the argument for holding on to smaller amounts of bonds is looking increasingly difficult to justify.
By cashing in smaller Premium Bond holdings and putting them in a competitive savings account, you might miss out on the potential for a lifechanging wins, but your money will at least grow. That means there’s a better chance it will keep up with, or even ahead of, inflation.
Stinton says: “Right now, many savers could be making their own luck. Online cash ISAs are offering market-leading rates of over 4.0% interest, giving you guaranteed growth.”
Savers can choose between instant access options with variable interest rates, or lock in a fixed rate for a specified period of time such as one, three or five years.
You can invest £20,000 into ISAs each year and all returns will be paid tax-free (from April 2027 the cash allowance will drop to £12,000, but only for under-65s).
You could also look at easy access (non-ISA) cash savings, especially if you’ve filled your ISA or you don’t pay tax on your savings interest.
If you already have some cash to cover emergency costs and known expenses, and you want higher growth, it may be worth considering a stocks and shares ISA.
Your money will be sheltered from dividend tax as it grows and there won’t be any capital gains tax to pay when you take money out.
Suter says: “Over the longer term, investing has proven to beat cash returns, and short of winning one of the maximum prizes, will undoubtedly stand a better chance than Premium Bonds at helping someone to amass wealth. For example, someone who had invested the non-winning Premium Bonds account average of £128.91 into Fidelity Index World 10 years ago would have seen a return of 252.3% and a pot worth a healthy £454.19. Had they decided to invest £1,000, that figure would have increased to £3,523.32.”
Investments can go down as well as up, and past performance does not guarantee future results. That’s why experts usually suggest only investing money that you won’t need at least for five years– this gives your money time to ride out any short-term market volatility.
Stinton says: “The longer the timeline, the greater the potential for compounding to work its magic, this is where you earn returns on past returns as well as the initial sum you invested.”
Choosing the right investments can be daunting if you’ve not invested before, but many ISA providers will offer access to a ready-made portfolio that matches your goals and attitude to risk.
If you decide to call time on your Premium Bond holding, it’s quick and easy to take your money out.
Haine explains: “If you have already registered for the online service, simply log into your account, select ‘Cash In’ on your dashboard, state how much you would like to withdraw, and select the account you would like the money paid into.”
You’ll be asked if you want to wait until after the next draw, which might make sense if it’s only a few days away and you don’t need the money urgently.
If you’re not registered online, you can call NS&I directly to make your withdrawal without setting up an online profile – you just need to complete an online form.
Haine adds: “You can also cash in via the postal service. Simply download, print and complete a cashing-in form and post this with the relevant bond certificates to the address stipulated. You can call NS&I to have a form posted out to you if you cannot access a printer.”
Find out all you want to know about equity release with expert advice.
Provided by HUB Financial Solutions Limited.
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