/ Money

Is it time to cash in your premium bonds?

Child against savings board

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 But have you had enough of waiting for a win and withdrawn your bonds for an alternative investment ?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?


Premium Bonds and the Lottery offer a small chance of winning a lot of money and a much larger amount of being a loser. I would far rather invest in something that offers a reasonable chance of making a modest gain. I have never bought a Premium Bond or a Lottery ticket.

It’s a matter of personal choice.

If you want to invest for income, then Premium Bonds are not the answer. However, with a tax-free effective interest rate of 1.3% (eqivalent to 1.6 or 2.2% for tax payers) with a big-enough holding for long enough you might not do much worse than an ordinary savings account.
For many people the only way they are ever remotely likely to acquire a large sum of money is through a gamble – National Lottery, Euromillions, Football Pools or – Premium Bonds. At least with the latter your stake is not lost. Stock market instead? You’ll get around 3-3.5% return but your investment can go down as well as up – but still, in my view, the best long-term means of saving if you have enough to invest across a large spread of share types. But no great windfall likely.
In anticipation of my premium bond being chosen by Ernie and the March cheques dropping through my letterbox, I’m just planning a sunshine break – back to Holiday Which.

As a 25 year old I have never had any premium bonds and none of my friends have too. But I am a little bit obsessed with the 1960’s, everything from the music to ITV’s Heartbeat and The Royal.

Due to my obsession with the 60’s I have ended up with a Milkman, it’s got me on the tv news and I have been looking into premium bonds. I have to admit it’s not for how much returns I would get. It’s more of the feeling of having them.

I know this goes against all I believe in as a Money Saver**. But I just love the 60’s too much.

**Watching stuff on tv like Heartbeat has given me money saving tips and helped me heat my home for free etc. So it’s not all bad.

Ten years ago I was cashing-in some bonds from Santander and decided to temporarily buy some premium bonds while I decided what to do with the money. I bought £29,990 (I already had £10 worth). Since then I’ve had 152 winners totalling £6400. Without the recession which caused the minimum win to drop from £50 to £25 and the number of bigger prizes to be slashed I would have had well over double that in winnings. They are fun and checking the numbers at the start of the month is great.

In the piece you have compared what you would have got over the last ten years which cash ISAs with what you should get on Ernie over the next ten years. This is meaningless. Please either give the historic data for premium bonds or the compounded amount for cash ISAs over the next ten years based on today’s interest rates.

“it would’ve grown to £7,024” without forcing you to switch to another provider year after year after year, which is something you don’t have to do with premium bonds?

The largest win ever had is £500.

Since the recession with the lowest prize dropping to £25, the winnings have reduced, so I’m now down to about £500-£700 a year from around £1200.

I’ve just tried Premiumbondcalculator.com (never heard of it before) with my numbers from my previous post ie the PAST 10 years. It says “You are lucky – only 2.25% of people who have put £30,000 in premium bonds over 10 years win £6400 or more. ” What? I find that hard to believe.

You could always use


as its potentially a much more reputable site.

Thanks, but that takes you to the same website.

Sue says:
1 March 2014

I have had premium bonds since 1959 and never won a penny. What a waste. I am in the process of getting rid of them.

Had them since the ‘eighties’…. won just £50 once, that’s all.

renniemac says:
2 March 2014

20 years ago a bought my husband premium bonds for his birthday, thought it was a novel birthday present for him. he still has his bonds and had small wins, Its one of those things you forget about until a wee cheque comes through the door. we know he wont get rich, but its a gamble with no losses, at the end of the day you still have the amount you put in. we do have ISA’S and Shares which you watch more closely, but the bonds are just something to tuck away, and forget about. Husband wont be cashing them anytime soon. c’mon Ernie give us all a smile…

You do know you can register to have the “winnings” paid directly into your bank account? Removing the need for trips to the bank, and with the added bonus of you getting your money around the 5-6th of each month as opposed to getting a cheque around the 15-16th

Southdownsman says:
6 March 2014

It certainly doesn’t make sense to make Premium Bonds your sole (or even your major) form of investment, but your capital sum is safe – unlike most other forms of gambling – and what you get is the dream factor, the thought that one day you might just get lucky. And it does rather brighten your day when amongst all the bills and rubbish pouring through your letterbox there’s that unexpected but welcome envelope from NS&I, even if it’s only £25. So I’m keeping my Bonds!

Amongst our waste paper this morning was a present from Ernie – it is a nice day anyway but it visibly brightened. My faith in PBs is maintained – you are wise to keep yours, Southdownsman. But no begging comments please – Mrs R was the lucky one.

I checked mine, my daughters, and both my parents numbers on the N S & I website a few days ago ( results are checkable after the 4th working day of the month ).

Not one of us won this month. Oh well, there’s always next month …

You just never know who’s reading these Converstions do you? Ernie must have seen your 1st of March post and thought it was time Citizens R had a windfall. I hope you picked a good sunshine break on which to splash your wife’s winnings. You’ll probably get a lemon in the post any day now.

I must admit that I have had another £25. Yay.

Farhan says:
7 March 2014

I run my own business and the money I have to pay in corporation tax is kept in the premium bonds. If I win , I win otherwise I would have no regrets. So far I had wins totallng £ 150 (but my investment is the maximum of 30 K).

I guess it depends on your nature. But who does not likes to become millionaire overnight ? I do 🙂

The_poacher says:
8 March 2014

But the winnings will belong to the company and not to you! Also are you sure that the company won’t have to pay CT on the winnings – just because something is exempt from income tax doesn’t mean it is exempt from CT

Phil says:
7 March 2014

My wife won £50 on the very first £1 bond bought when she was a child of the fifties. A cracking compound return but unlikely to change our lifestyle.

Anyone remember the high paying Icelandic banks and their promise of repayment? At least NS&I promise to pay up in seven days. Just part of a diversified portfolio with the very very very slight chance of a bigger win.

Paul Warren says:
2 October 2015

Well it does seem a ”coincidence” that I had a half way input in the bonds when the limit was 30k . I had 25.00 – 50.00 ”win” every month ..I Had a letter from them out of the blue saying if I wanted to input more.. I didn’t.. then the limit went up to 40k..50k,, since that letter its been tumble weed time since then winning nothing every month.. pulled out nearly all except 300.00 .. still nothing nearly a year on now..

Colin says:
2 November 2015

If you have less than a thousand in you can easily wait three or four years to get a 25pound payout

The unfortunate one says:
31 December 2015

Premium bonds are an unbelievably poor option for investing. I bought £10000 of premium bonds in November 2014, after receiving redundancy lump sum from my employer. I used most of it to pay off my house mortgage, some of in ISAs (up to the maximum allowance) and the remainder in premium bonds. I received absolutely nothing in return for my premium bonds after one year, so I cashed them in. I could account for the zero return as just bad luck but the cynic in me tells me that it’s just a con!