The prize rate for Premium Bonds has dropped several times this year
Premium Bonds savers may want to review their savings as the Autumn Budget approaches. On Wednesday, November 26, Chancellor Rachel Reeves will outline her latest financial policies before the Commons this week.
Speculation suggests there could be changes impacting savers, including fresh policies surrounding ISA allowances. This is also an opportune moment for Premium Bonds holders to examine their savings portfolio.
Kevin Mountford, co-founder of savings provider Raisin UK, said: “With the Budget approaching, it’s a good time for Premium Bonds holders to take stock of how their savings are really performing.” He reminded customers that their chances of securing a prize are actually extremely low.
The expert said: “While the idea of a big win is appealing, the odds of any single £1 Bond winning in a given month are 21,000 to one, meaning most savers earn nothing at all. If you’ve held Bonds for more than a year without a win, it might be worth reviewing whether that money could work harder elsewhere.”
The prize fund rate for Premium Bonds currently stands at 3.6 per cent, following three reductions by NS&I during the past year. Mr Mountford encouraged Bond holders to contrast this with the rates currently available across the broader savings market.
He said: “You can now find easy access accounts paying around 4.5 percent, a guaranteed return compared to the long-shot nature of Premium Bonds. Premium Bonds are fun, but they’re not a plan, and in today’s market, guaranteed interest can deliver far more.”
At present, several easy access accounts offer rates of 4.5 percent or more, as well as some fixed term accounts and ISAs. Christian Harris, chief analyst at investment comparison site Investing.co.uk, also urged customers to seriously consider cashing in their Bonds.
He said: “If it’s been several draws, upwards of six months, and you’ve won nothing, then it could be time to consider changing tact.”
He highlighted that people are not earning any compound interest with their Bonds, unlike what they could be earning if they put their funds in a conventional savings account. Mr Harris suggested an alternative such as the Home Deposit Saver offered by Leeds Building Society.
This account currently offers 4.8 percent and allows deposits up to £30,000, although monthly deposits are capped at £500. If you paid in the full amount over a year, you would earn £132 in interest.
The expert said: “Another option is to shift a portion of your funds into short-dated bonds or money-market funds to get steady, low-drama growth.” Mr Mountford suggested that Premium Bonds may still be a good choice for some savers.
He said: “They still have their place for those who value the thrill of a possible win and the peace of mind of 100 percent capital security. But if you’re saving for a goal such as a house deposit or retirement fund, relying on luck isn’t the most efficient way to grow your money.
“For many, a mix can make sense: keep a small amount in Premium Bonds for fun, and move the rest into a fixed or easy access savings account with a competitive rate.”
Could there be changes to Premium Bonds in the Budget?
When questioned about potential changes to Premium Bonds in the Budget, Mr Harris replied: “I don’t expect significant changes to Premium Bonds to be announced.” He also issued a warning to people considering transferring their savings into stocks and shares.
The specialist said: “I’d be cautious about switching funds to the stock market currently because we’re seeing bubble-like territory, particularly in the AI space, which makes investments there particularly high risk.”