Premium Bonds odds of winning £1million ‘haven’t improved’ – and could ‘get worse’
Martin Lewis advises on savings accounts and premium bonds
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Premium Bonds is a savings product which is managed by National Savings and Investment (NS&I), an institution backed by HM Treasury. As opposed to other savings accounts, interest is not earned on Premium Bonds with the rate instead funding a monthly prize draw for tax-free prizes. Every month, two lucky winners take home £1milllion after their bond number is chosen at random as part of the lottery.
Other large cash prizes up for grabs include £100,000, £50,000 or £25,000, with smaller amounts paid out to savers each month also.
Yesterday (May 24), NS&I confirmed plans to increase the fund rate for their leading product from one percent to 1.25 percent.
This will come into effect in June 2022 as part of that month’s prize draw, which will see an extra 1.4 million prizes handed out to bond holders.
Following this change, the odds of each £1 bond number winning a Premium Bonds prize will go from 34,500 to 1 to 24,500 to 1.
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However, Premium Bonds holders are also having to deal with rising inflation which could affect their savings down the line.
Last week, the Office for National Statistics (ONS) confirmed that inflation had reached a 40-year high of nine percent.
When it comes to Premium Bonds, inflation can lower the value of what a person has in bonds over time which can negatively affect savers.
The recent hike to the country’s inflation rate likely promoted NS&I to raise the fund rate in response.
Sarah Coles, a senior personal finance analyst, warned of the “higher cost” posed by investing in Premium Bonds as opposed to other savings methods.
Ms Coles explained: “You need to understand what you’re giving up. You don’t make any interest on money in Premium Bonds.
“And while at a time of low inflation you may feel this is a small price to pay for the chance of a big win, while inflation is running so hot, it means the spending power of your money is being eroded far more quickly. It means holding Premium Bonds comes at a higher cost.
“You also need to appreciate that the prize rate is not the same as the returns you can expect. If you hold the bonds you won’t make 1.4 percent.
“Those with better-than-average luck will make more, and those with less luck can go decades without a win. In an average year, someone with £1,000 in the bonds will win nothing.”
Furthermore, Ms Coles cited how the odds of winning the grand £1million “will get worse” the more enticing Premium Bonds become as a saving option.
She added: “It’s worth knowing the chances of a win too. While the chance of any win at all with a £1 bond is 24,500, in May, the chances of winning £1 million were 1 in 58.91 billion – which is vanishingly small.
“Even after the prize rate changes, there will still only be two million pound prizes, so the odds of winning a million haven’t improved.
“In fact as more people buy more bonds, unless the number of million pound prizes increases, the odds will get worse.”
For next month’s prize draw, bond holders will be able to see if they have won the £1million jackpot by going onto the nsandi.com prize checker after the results are announced.
Bond holders will need their Premium Bonds’ number to use the website and their NS&I number or holder’s number to check via the prize checker app.
It is also possible for bond holders to check if they have any unclaimed prizes owed to them.
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