Laura Suter, director of personal finance at AJ Bell, considers whether NS&I premium bonds are the best place for savers and investors to put their cash.
Premium Bonds have long been a popular place for savers to stick their cash and try their luck at winning a prize in the monthly draws, yet the data obtained from a Freedom of Information request by AJ Bell reveals that two-thirds of people holding these bonds have never won a prize. Of the 22.5 million current Premium Bond holders, a staggering 14.4 million have never won.
According to the latest figures from NS&I, £126 billion is held in Premium Bonds, meaning there is a huge amount of money making no return whatsoever when savers could otherwise be raking in interest in excess of 5% if they were to shop around for other cash products on the market.
There have been 5.3 million prize winners in the 12 months between June 2023 and May 2024, and of those around 80% won multiple times. What’s more, the average holding for those prize winners during this period was £23,047 – far higher than the average holding for all customers.
Although the overall average holding of Premium Bond holders sits at a more modest £5,185, given there’s a pretty decent chance that amount will not win a prize, savers might be better off considering other options with their cash savings. For example, if they took more risk and invested the money instead, putting that £5,185 in the Fidelity Index World global tracker fund 10 years ago, they’d be sitting on a pot worth £16,689 today**. Of course the lure of Premium Bonds is that you might win the big, £1 million prize, but these figures show that it’s very unlikely if you have a small amount saved in the bonds.
What these figures make clear in this extended period of higher interest rates on cash and a cost-of-living crisis is that savers will often be better off exploring the various inflation-beating cash rates on offer elsewhere in the market rather than leaving it to chance in a Premium Bonds account.”
*Based on data obtained by AJ Bell from the NS&I via a Freedom of Information request, accurate as at 23 May 2023. The number of current holders who have not won a prize is based on data from February 1994 onwards and includes new holders who were not eligible as their Bonds were not beyond one month purchased.
**Based on FE data. Doesn’t take into account platform fees.
Main image: brano-heYdDdq0cbE-unsplash
