The rules for Premium Bonds have changed (Image: Getty)
Premium Bonds savers may be weighing up their options as NS&I makes major changes to the scheme. A savings expert has spoken about what other choices are available as your chances of a win have been cut.
From the April draw, the chances of winning have been reduced from 22,000 to one to 23,000 to one. The prize fund rate for the scheme has also been cut, from 3.8 percent down to 3.3 percent.
Tim Grimsditch, managing director at financial support group Unbiased, spoke about who Premium Bonds may still suit as a savings option, despite the dwindling chances of a win. He said: “Premium Bonds remain a fully safe place to hold cash, backed entirely by the UK Government, which is their biggest strength.
“But they still shouldn’t be seen as a reliable way to grow your savings, as many people receive far less than the average return and may go long periods without any wins at all.” Prizes in the monthly draw include big amounts such as £50,000, £100,000 or even a £1million jackpot.
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But you can go months or even years without winning anything. Plus the vast majority of prizes are for small amounts, such as £25 or £50. Mr Grimsditch spelled out the reality facing Bond holders.
Your odds have worsened
He said: “For people with smaller Premium Bond holdings, the recent changes make it even harder to see meaningful returns, because the odds have worsened and typical payouts already tend to fall below what you’d get from straightforward savings accounts.
“For those with larger holdings or saving toward specific goals, the changes also weaken the case for keeping big sums in Premium Bonds, since the reduced prize pool and less frequent wins mean anyone looking for steady, predictable returns can no longer rely on frequent winnings.
“In both cases, if reliability and progress toward financial goals is what savers are looking for, they are better off moving at least part of their money to accounts offering guaranteed returns.”
Alternative accounts
You can hold up to £50,000 in Premium Bonds. Many savers set up their account so that when they win a prize, the funds are automatically used to buy more Bonds.
This increases your chances of bagging a future win. If you are thinking about cashing in your Bonds, the expert said you may want to act soon. He said: “Those considering cashing in may find that moving money sooner into a fixed-rate or high-interest account allows guaranteed interest to begin immediately, rather than waiting to see how the new prize rate affects returns.”
In contrast, if you are thinking of investing in more Premium Bonds, his advice is: “Anyone considering buying more should review their broader goals first. Adding money to Premium Bonds increases the chance of winning but does not guarantee stronger returns than a standard savings product.”
