Premium bonds can beat accessible accounts for savings over £ 4,000 – but don’t expect to earn the 1% headline
NS&I Premium Bonds are a savings account to which you can deposit money (and withdraw money at any time), where the effective interest paid is determined by a monthly raffle. You buy bonds worth £ 1 and each has an equal chance of winning. The more you buy, the more your chances improve. For more information, see our guide to premium bonds.
However, Martin stated that while the premium bond prize fund is 1%, this is not what you should expect. For example, if you had $ 100 in premium bonds, it’s actually impossible to earn 1% as the smallest price you can win is $ 25 – so it’s all about the probability. He added, “For anyone who wins £ 1 million, many bonds don’t have to pay anything.”
However, Martin went on to say that the more bonds you have, the more you can expect to win. He noted, “If you have up to £ 1,900, you are typically lucky to win nothing. Then it rises sharply and gets higher and higher until you hit the £ 50,000 at which, with typical luck, you’d win 0.9%, or £ 450 a year. “
As opposed to the top easy-access savings account that offers 0.67% interest, Martin said that most people over £ 4,000 with typical luck are better off with premium bonds.
Use our Premium Bond Calculator to see how much you can expect to win and how likely you are to exceed normal savings depending on your circumstances.