A warning has been issued to 14.3 million Premium Bonds customers: the impact of not winning prizes can be shocking, according to finance experts. Premium Bonds, the UK's most popular savings product with over 22 million holders, pays interest through a prize draw with an annual prize rate of 3.8%. However, a Freedom of Information request by AJ Bell reveals that 62% of bond holders—14.3 million people—have never won a prize. These unlucky customers have held their bonds for an average of 8.1 years.
Lost Growth Compared to Cash Savings
AJ Bell calculated that over 8.1 years, the average pot of £128.91 could have grown to £150.82 in a cash savings account—a 17% increase. For a £5,000 account, it could have reached £5,850. Sarah Coles, head of personal finance at AJ Bell, commented: “The Premium Bonds odds are stacked against you. In any given month, each bond has a 22,000 to 1 chance of a win of any kind, and a vanishingly small chance of winning a life-changing sum of money. But 62% of people have never won anything from their Premium Bonds, and those serial losers have held the bonds for an incredible 8.1 years on average.”
Inflation Erodes Spending Power
Coles added: “The bonds don’t pay any interest, so if you don’t win, you don’t get a return on your money. It means that over time, you’re losing spending power after inflation, and the impact can be shocking. The average bond holder who has never won a prize has £128.91 in Premium Bonds. If they’d bought them 8.1 years ago, their pot would have needed to grow to £191 to have the same spending power today.”
Investment Potential Over Long Term
Coles noted that money could work harder elsewhere. Over 8.1 years, £128.91 invested in a global tracker fund could have turned into £338.30, and £5,000 into £13,122. She said: “Over this kind of period, it also makes sense to consider investment, because 5-10 years is usually long enough to ride out the short-term ups and downs and take advantage of the long-term growth potential of investments.”
Premium Bonds Still Popular
Despite the warning, Coles acknowledged that Premium Bonds remain beloved: “There will always be people who love Premium Bonds, and there will be those who have never won but still cling to the hope that their lucky day might be around the corner. However, if you’ve left money in these bonds for years, it’s worth considering how much you’ve won overall, and asking yourself whether you have kept pace with inflation, or whether your money could be working harder for you in savings or investments.”
According to Money Saving Expert, Premium Bonds are a good option for higher-rate taxpayers who have maxed out their ISA and do not plan to invest long term, as they avoid tax on prizes and do not use the personal savings allowance.
