The odds of scooping the main prize when having a flutter on Premium Bonds is reportedly more than 40 BILLION to one. Although the odds of winning smaller prizes are 24,000 to one and the fund rate is equivalent to an interest of 1.5 % per annum depending on your luck.
Although the prizes are tax free, this ‘average' return is equivalent to just 1.875% for basic rate tax payers. You have to remember that the highest prize is £1 million on a maximum investment of £30,000 each month, so for the average to be 1.5% most investors are receiving much less than the average yield and possibly nothing at all.
So why would you bother? I suppose the answer is they are seen as a safe haven for cash, as they are run by the Government - backed National Savings and Investments.
As a nation, we have a staggering £42 Billion invested in Premium Bonds and more than half of us owns at least one. However, as stated above most investors would have earned more if they'd stuck with savings accounts.
One also needs to be mindful that unless you are regularly winning prizes, the rising cost of living is effectively eroding the value of your investment. With inflation running at 4.5% surely people need to question sticking with Premium Bonds.
Should you wish to consider alternatives to Premium Bonds dictated by your attitude to investment risk I would welcome any enquiries.