Premium Bonds savers stay loyal as £1m jackpot shrinks – 'still a shedload of dosh'


The Bank of England has hiked base rate three times in a row, but National Savings & Investments (NS&I) is yet to increase the Premium Bonds prize rate. This is the annual return savers can expect on their money, with average luck.

The two monthly £1 million jackpots have not been increased since they were first introduced in 1994.

Their value has been eroded to just £500,000 in real terms due to inflation in that time.

Savers have every right to be disappointed, especially after three Bank of England rate hikes, said Sarah Coles, senior personal finance analyst at Hargreaves Lansdown.

“It’s now worth considering whether Premium Bonds really are the right place for your money after all.”

NS&I hasn’t boosted the Premium Bonds prize rate despite lifting the returns on its Income Bonds and Direct Saver products.

Coles said NS&I has little incentive to do so, because it is close to hitting its fundraising target for the year.

“If you’re waiting for good news on Premium Bond prizes, don’t hold your breath.”

Savers should consider whether to move their money to protect its value as inflation skyrockets, she said.

The best buy easy access savings account from Cynergy Bank currently pays 0.84 percent, below the prize rate, but fixed rate accounts now pay notably more, Coles said.

“For those who can tie up their cash for a year, the best rate has risen to 1.71 percent, while over two years the best rate is currently 1.96 percent.”

Inflation is at a 30-year high of 6.2 percent and set to peak at 8.7 percent later this year. “The higher inflation is, the more it eats away at the value of your savings,” Coles said.

READ MORE: Premium Bonds prize checker: How to check if you’ve won thousands

Percy Vere commented: “£1,000,000 or £500,000, it don’t matter which I win. Both are still a shedload of dosh thanks very much.”

Belperboy said “keeping money in Premium Bonds is slightly better than in a bank current account in that your cash is protected from bank collapse. It can also be withdrawn in a couple of days.”

Yet he wasn’t impressed by the one percent prize rate, saying that with these “abysmal interest rates it is not an investment”.

Another reader, Still Politically Correct, said: “My wife and I both have the maximum in Premium Bonds and the only reason we don’t take it out is that returns elsewhere are just as bad.”

Coles said Premium Bond savers must decide whether they need to get themselves a guaranteed return, what can afford to rely on luck to boost the value of their savings. “Either answer is perfectly valid, you just need to make the right decision for you.”

Victoria Scholar, head of investments at Interactive Investor, added: “Inflation eats away at the value of all your savings so make sure you are getting the best possible return.”


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