Tax-free Premium Bonds might seem like a safe home for your savings with a long-shot of a huge windfall. But have you had enough of waiting for a win and withdrawn your bonds for an alternative investment ?
More than a decade ago, I had a small windfall, which I stashed away in Premium Bonds, just to see how my luck went. I’d heard that the return you could get from regular small prizes could approach savings account rates – and there was always the chance of winning the big one and becoming a millionaire. So I left my money in there and every few months, a cheque for £25 would pop through the letter box. I knew the cash might do better elsewhere, but I didn’t mind as each small payout came with the thrill of thinking my life was about to change.
But the cheques dried up. They became less frequent in 2011, and last year National Savings and Investments announced it was cutting the number of prizes paid out to reflect lower interest rates. Now, my prizes seem to have disappeared altogether. So I’ve given up and cashed in my bonds.
Premium bonds or cash Isa?
Have I done the right thing? If I’d put £5,000 in the average savings accounts over the 10 years I’ve held my bonds, I’d have £6,168. In the average cash Isa, it would’ve grown to £7,024. And if it had been invested in a FTSE All-Share tracker fund, despite the fluctuations, it would’ve grown to £10,800. My prizes have never matched those returns.
Maybe I just had bad luck? Not according to Premiumbondcalculator.com, which estimates a person with average luck and £5,000 of Premium Bonds would collect just £500 in winnings over the next decade. So I’m forgetting Premium Bonds and heading for stocks and shares. A tiny chance of winning a million isn’t worth missing out on the more likely prospect of doubling your money over a decade.
Do you swear by premium bonds or have you taken to investing your money in more reliable returns?