Premium Bonds: Were they worth it?

How much did I win over the first 12 months?

For the last few years Premium Bonds have been a popular option for savers, and understandably so. With interest rates staying in the gutter, there’s the potential to win big with these bonds.

But the key word there is potential. There is no guarantee of winning anything at all with Premium Bonds.

As ever with this site I try to put my money where my mouth is, and with a year now passing since I put money into them, it’s time to share how they did.

Find if I won, how much, and how that would compare to if I’d kept the cash in an easy-access account.

What are Premium Bonds?

I’ve got a detailed guide taking you through how they work, so do read that. But very quickly, Premium Bonds are a form of investment, but unlike stocks and shares, these ones can’t lose value.

They’re held with National Savings & Investments, so effectively you’re lending money to the government. They cost £1 each and you can buy up to £50,000 worth.

Each Bond you own goes into a prize draw every month, with the chance of winning between £25 and £1m.

There’s a prize rate of 1%, but that doesn’t mean you get 1% back. Since the lowest prize is £25, for every bond that gets this, 24 will win nothing. In fact it’s worse than that as the larger prizes knock out even more bonds from picking up a prize.

How many Premium Bonds I bought

The broad rule of thumb is that having £5,000 saved over a year is the minimum needed to equal the interest from an easy-access account paying between 0.5% and 0.6% This is based on the average rate of luck.

I decided to double this, and on 31 January 2021 I invested £10,000 with NS&I Premium Bonds, giving me 10,000 individual bonds.

I also bought another £8,000 bonds in June. I’ll share details of how they went below, but they won’t factor into the annual savings comparison.

How did each draw go?

Bonds need to be invested for a full calendar month before they are entered into a prize draw, hence buying them on the last day of January rather than the start of February.

Draw 1 (March 2021)

Result… no win. Disappointing but to be expected.

Draw 2 (April 2021)

A win! I got my first prize. It was the lowest possible amount of £25. But better than nothing.

Draw 3 (May 2021)

Another win! Also £25, but with the money saved for three months and a few days I’d already made the equivalent of 0.5%.

Draw 4 (June 2021)

No luck this time

Draw 5 (July 2021)

Another month with no prize.

Draw 6 (August 2021)

The best month yet with two prizes! Both were £25, giving me a total of £50 for the month and £100 overall, giving me a 1% return already.

Draw 7 (September 2021)

So I win £25 again. BUT this was from a bond bought in the second investment, and won’t count to the overall comparison.

Draw 8 (October 2021)

Nothing at all this month.

Draw 9 (November 2021)

Another £25 win, but also from the second lot of bonds.

Draw 10 (December 2021)

Boom. Yet another £25, but yet again, not from the initial £10,000 invested.

Draw 11 (January 2022)

Another month with no prize.

Draw 12 (February 2022)

And this draw hasn’t happened yet – but I’m not including it anyway as it’ll be a couple of days outside the 12 month period.

How much did I win overall?

Over 12 months, my £10,000 investment won a total of £100, or 1%. So I actually had better than average luck, with four £25 prizes rather than the hoped-for £75.

How did my wins compare to easy-access accounts?

At the time of buying the bonds, the best easy-access account paid 0.55%. So £10,000 put in that account for a year would have made me £55. Meaning I made almost double.

Of course, other accounts appeared over the year which offered between 0.65 and 0.75%, so perhaps if I’d moved the money to one or some of these I might have got a little more, but not much. Let’s say halfway through the year I got a rate of 0.65%. That would only have made me another £5.

So hands down, putting my money in Premium Bonds last year was better than just leaving it in an easy-access account.

Were Premium Bonds the best option for my savings?

Andy’s Analysis

I’m really pleased with my total, though disappointed not to win anything in the final five draws.

The results show it was worth it for me to use them for my emergency savings. However, it’s really important to remember that I could easily have won less.

And with the base rate of interest already increased from 0.1% to 0,25%, and likely to jump up again in coming months, we might actually start to see easy-access account move closer to 1%, if not go above it.

So for 2022, it’s well worth checking that you can’t get close to 1% elsewhere, as that’s guaranteed cash. Of course, NS&I could also increase the win rate, I’ll keep you across everything you need to know in my monthly savings updates.

Can you beat Premium Bonds returns?

You can actually beat my return of 1% in other accounts. The issue is these accounts have a limit on the balance eligible for savings.

The best is the app Claro paying 2% on £3,000, and then Virgin Money paying 2.02% on £1,000 (boosted to 5.02% for bank switchers). So you could, and probably should start with those. You can read more about these and other accounts in my savings account best buy tables.

And if you invested money in the stock market, there’s a chance over the long term you’d get a better return.

But where I think Premium Bonds have a place is for the emergency funds you need access to, but can wait a few days to get. So there’s a few grand in Virgin or Claro, then the rest in bonds.

7 thoughts on “Premium Bonds: Were they worth it?

  1. Planning to write something on Premium Bonds myself so this was really interesting to read. My main issue with them is that you have to put a lot of money in for the probability to increase to a rate that’s comparable with interest in a bank account and obviously not everyone has that – unless you’re very lucky of course! Out of interest, did you buy the additional bonds because you did so well in the first couple of months? And will you switch out now that base rate, and potentially interest rate elsewhere, is going up?

    1. Hey Qin, yes totally, they’re no good for small amounts!

      Yes, it did well and had some money I needed access to in the short term so thought I’d see how it went. If rates do go up, and the prize rate doesn’t also change, I’d likely move the cash

  2. I too bought £10,000 of Premium Bonds in December 2020 and won £100 over the year in 4 X £25 wins.

    I also have opted to reinvest any winnings, increasing my chances of another win.

    Who knows, I could get a bigger win in 2022 🙂🤞

  3. I bought £30k of bonds and my first draw was July 2021 and so far, including Feb 2022, I have won £125. I have opted to automatically reinvest any winnings under £5k, so some of the winnings might be from ‘newer’ bonds – I’ve not checked. However, since the ‘new’ bonds cost me nothing extra above my initial investment, it makes no difference. Like you, it’s all been £25 wins, with one month getting two. I’m more than happy with the arrangement and checking my a/c on the 2nd of each month feels similar to checking lottery numbers, without the sinking feeling that if I have not won, I need to spend more if I want to ‘play’ again.

  4. You did well and I have about 9k of premium bonds and win at least £50 per year.

    What I think you are missing from your article are premium bonds could also potentially win you life changing money without any risk to your capital. What you have seen this year is you have beaten the base rates of saving accounts plus been in with a chance to win up to 1 million pounds.

    I quit doing the lottery when I bought my premium bonds so you could say I’m saving even more lol

    1. Thanks Adam. Yes, that detail is in my larger Premium Bonds article. I didn’t want to just write the same article twice!

      1. Ok thanks Andy I didn’t realise there was another article on this so will have a look.

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