£50k in Premium Bonds after a year: What could you win?

Three very different results show there’s no guarantee

Even though we’ve had some of the best savings rates in years, Premium Bonds remain popular. Even though there’s no guarantee in what you could win, people hope they might get lucky and net big prizes – especially if they have a lot of cash invested.

To get an idea of how that pans out, I asked three people with the maximum £50,000 saved what they won in a year. Though your own situation will differ, it’s a great way to understand what your chances are.

What are Premium Bonds?

Unlike a savings account where you get a guaranteed return on your deposits – known as an interest rate – Premium Bonds instead have a Prize Rate.

This looks like an interest rate, but it actually represents how much of the total invested is given out in prizes. These prizes range from £25 to £1 million. Here’s more on how they work.

What would you hope to win in a year?

In the last year, the prize rate has actually changed three times, starting at 3.75%, and going up to 4.65%, before dropping to 4.4% for the most recent draws.

  • June and July draw 2023 – 3.75% prize rate
  • August draw 2023 – 4% prize rate
  • September 2023 to February 2024 draws – 4.65% prize rate
  • March to May 2024 – 4.4% prize rate

If you add that all together it gives an average prize rate of 4.38%. That means that someone with the full £50,000 will hope to get a return of £2,190 in a year.

It’s worth noting though that the likelihood of getting close to this rate reduces if you have less money held in PBs as you’ll effectively have fewer entries in to each draw, and therefore fewer chances of winning.

Still, the prize rate is a useful shorthand for those with average luck. But would you have average luck?

How much did £50k win over a year?

A few years ago, when savings rates were particularly poor, I had £10,000 in Premium Bonds for a full 12 months. And my experience in that time was pretty good. I actually beat the then rate of 1%.

But since interest rates elsewhere have improved I’ve only had money in PBs (as I like to call them) on and off – effectively those months when the prize rate was decent, but moving the cash when it was beaten.

Then last year, I wrote about some friends who had kept the full £50,000 cash in Premium Bonds for six months – with surprising results.

Now a full 12 months have passed, I asked them to share their further wins – along with the results from a third friend – to see how things panned out.

We’ll call them saver one, saver two and saver three! Here are all their prizes, month by month.

Saver 1Saver 2Saver 3
June 2023£75.00£200.00£150.00
July 2023£100.00£50.00£700.00
August 2023£50.00£100.00£50.00
September 2023£50.00£400.00£125.00
October 2023£0.00£175.00£100.00
November 2023£325.00£250.00£200.00
December 2023£175.00£350.00£0.00
January 2024£225.00£125.00£375.00
February 2024£50.00£25.00£50.00
March 2024£125.00£1,000.00£175.00
April 2024£50.00£0.00£125.00
May 2024£200.00£275.00£175.00
Total prizes£1,425.00£2,950.00£2,225.00
Effective win rate2.85%5.90%4.45%

You can see just how random it is. All three had one month with no wins, but the amount won across the win differs hugely.

Saver one fared worst, getting way below the prize rate with a poor 2.85% return, whereas saver two knocked it out of the park with a massive 5.9% return. Meanwhile the third saver wasn’t too far above the average rate itself.

Why are the results so different?

Forget the rumours how newer bonds are more likely to win, that older bonds are sometimes excluded, that bonds that have already won won’t win again and even that people outside of London are at a disadvantage.

These are all myths. Every single bond, new and old, across the UK, has the exact same chance of winning one of the prizes. The only thing in the favour of these savours is that have more entries thanks to having more bonds.

But ultimately is is just down to luck. Saver two was just a lot luckier than saver one, while saver three was just a little luckier than average.

It’s a great example of when someone wins more than expected, someone misses out. At it’s most extreme in PBs, that’s shown when someone wins really big and many, many people win nothing at all.

And here’s the crazy bit about our three savers. The total combined prize amount was £6,600, with an average prize rate of 4.4%. That’s only a little less than the 12-month average prize rate. While the average for savers one and two was bang on 4.38%. It’s a perfect fluke to happen on such a small sample, but it demonstrates it all averages out!

Premium Bonds vs savings on £50k

So, we’ve established you could do well or you could do badly with Premium Bonds compared to the prize rate. But what about if you’d instead put the money in an easy access savings account?

If our savers instead had moved their money from best buy to best buy in that period (a total of five transfers), they’d have got between 3.71% and 5.2%. In all but the first month, the top interest rate was higher than the prize rate.

The average interest rate works out (roughly) as 4.87%, and with £50,000 saved you’d earn an average of £2,435 in guaranteed interest. That’s compared to the average prize rate of 4.38% and winnings of £2,190.

In our examples, only saver two (a return of 5.9%) was actually better off with Premium Bonds, and both savers one (2.85%) and three (4.45%) ended up with less. However it’s not actually that simple.

Tax on interest

First, you need to account for tax. Premium Bond prizes are tax-free, so there’s no interest on the return. Outside of PBs or ISAs, you are taxed, but you can’t just deduct the tax rate from the interest rate to get a proper comparison.

You also need to factor in the personal savings allowance. Here’s what putting the full £50,000 in to savings at the average rate would really return (remember the Premium Bond total is average luck).

AmountRateTax-freeTotal interest after taxEquivalent rate after PSA & tax
Premium Bonds4.38%All£2,190.004.38%
Non taxpayer4.87%All£2,435.004.87%
Basic rate taxpayer (20%)4.87%£1,000£2,148.004.3%
Higher rate taxpayer (40%)4.87%£500£1,661.003.32%
Additional rate taxpayer (45%)4.87%£0£1,339.252.68%

So in this instance, it still appears that Premium Bonds would have given the best return over this period. But as we know not everyone will get the prize rate, so that only applies to those with average luck.

Better though would be instead to mix savings and Premium Bonds, and take advantage of the ISA allowances on top. So a basic rate payer could put the first £20,000ish into the top paying non-ISA and the same into ISAs (assuming for simplicity the same average return), leaving £10,000 for PBs. While a higher rate taxpayer would have £10,000 in a non-ISA and £20,000 in each of the ISAs and PBs.

Sadly we can’t ever calculate the true returns here as it’s likely that someone with £30,000 or £40,000 in PBs will win less than someone with £50,000 there. However, if we keep the average prize rate at 4.38%, and combine it with the other tax-free returns, it could look like this.

Savings in PBs after PSA and PBsRatePrizesInterest elsewhereTotal interestEquivalent rate
£10,000.00 (basic rate taxpayer)4.38%£438.00£2,000.00£2,438.004.88%
£20,000.00 (higher rate taxpayer)4.38%£876.00£1,500.00£2,376.004.75%

Without doubt, the combination is giving the best overall returns on money – for someone with average luck.

And if we put in a bad (though not worst case) scenario where the prize returns were just 1% on the additional cash, you’d still match returns after tax for a basic rate taxpayer who put everything in easy-access savings and beat it as a higher rate taxpayer.

Savings in PBs after PSA and PBsRatePrizesInterest elsewhereTotal interestEquivalent rate
£10,000.00 (basic rate taxpayer)1.5%£150£2,000.00£2,1504.3%
£20,000.00 (higher rate taxpayer)1.5%£300£1,500.00£1,8003.6%

So, if you’re after a guaranteed return rather than rely on luck, you’re still better off using your PSA and ISAs allowances first.

Of course, additional rate taxpayers only get the ISA tax-free returns, so they’d be better off with PBs over other savings with savings of this size.

Earning interest on the prizes

Another factor to consider is you can’t reinvest prizes into PBs if you already have the full £50k saved. Which means our three savers all (hopefully) moved their winnings into a high paying account to keep earning, perhaps as much as 7% via regular saver, then they’d earn more on top – even if tax was potentially due on that.

Smaller balances

And of course, our savers all had the whole £50,000 to save. Most people won’t have anywhere near that. So how much would beat the 4.38% average Premium Bond prize with the guaranteed returns from the average savings rate of 4.87% in this period?

A basic rate tax payer would need £30,000 or less in other accounts to beat PBs, and a higher rate taxpayer would need £12,000 or less. And of course, there are are ISAs too.

Also, even though additional rate taxpayers would pay tax on all earnings outside of an ISA, they’d still need to win enough each year to match the 2.68% after tax rate elsewhere.

Are Premium Bonds worth it?

Andy’s analysis

As demonstrated, there’s no guarantee you’ll do well with Premium Bonds. I think getting a guaranteed savings rate that beats the prize rate is better than the slim likelihood of winning big.

But, there are times when they’re worth a shot. As I experienced before the base rate hikes boosted savings rates, there can be occasions where Premium Bonds net you more cash. That was especially the case when savings rates were below 1%. However, it’s unlikely we’ll go back to those levels any time soon, if at all.

More relevant to now is for those with large sums saved up. If you’re already filling your personal savings allowance (or if you don’t get one) and have maxed out the annual ISA allowance (perhaps in stocks and shares rather than cash), Premium Bonds can be a good option.

But, you do have to ask whether you need such significant sums in cash – often you only really need to cover big forthcoming spending and six to 12 months of essential expenses.

2 thoughts on “£50k in Premium Bonds after a year: What could you win?

  1. I never fully understand how Premium Bond Winnings are ‘Tax Free’! Unless you spend any winnings (or give them away) you’re very likely to put them into a savings account where tax IS fairly certain these days.

    It would be a nice problem to have to deal with of course – particularly if a £1million cheque arrived!

    1. Yes but you’d only pay tax on the interest on the winnings, not the winnings themselves.


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