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Are Premium Bonds worth the gamble?

Savers can now invest £50,000 in NS&I bonds

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Savers can invest a new maximum of £50,000 in Premium Bonds from today. 

A wealth of savings are expected to pour into the National Savings & Investments (NS&I) bonds following the increase from £40,000.

The limit was last increased, from £30,000, in June 2014, since when the total amount invested has risen by £6bn, according to NS&I.

It said it is expecting this figure to increase again following today’s changes. 

But are Premium Bonds the smartest place to invest money? Which? weighs up the pros and cons. 

Premium Bonds: the basics  

Premium Bonds don’t generate interest. Instead, each bond is entered into a monthly prize draw and winners are selected at random by NS&I.

Each month you could win a cash prize, from £25 up to a jackpot of £1 million. All winnings are tax-free. 

The number of monthly £1m jackpot prizes awarded doubled from one to two last August. 

Find out more: Premium Bonds – our guide explains everything you need to know

Premium Bonds: What are the odds of winning?

The monthly prize pot is generated from interest paid on the total amount invested in bonds. This is currently set at an annual rate of 1.35%.

Essentially, this means someone with ‘average luck’ may get a return of around 1.35% on their investment. 

Of course, there’s a possibility you might never receive a prize and the real value of your savings will be diminished by inflation.

On the other hand, there’s a monthly opportunity to win a life-changing amount of money.   

What are the best alternatives to Premium Bonds?


Isas pay tax-free interest on your savings. The overall limit for new deposits into an Isa is £15,240 during the 2015/2016 tax year. This can be placed into a cash Isa, a stocks and shares Isa or a mixture of both. 

The best rate instant-access cash Isa in the Which? Money Compare Tables comes from Punjab National Bank, offering 2.00% AER. 

Which? Money Compare Table: – Instant-access cash Isas – find a great deal 

Savings accounts

There’s no annual limit to the amount of savings you can place into a traditional savings account. Most savings accounts allow you to deposit far more than £50,000, whereas you can only invest £50,000 in Premium Bonds.   

According to the Which? Money Compare tables, the best rate instant-access savings account currently pays 2.02% AER, although interest earned will be taxable.

Which? Money Compare Table – Instant-access savings accounts – hundreds of accounts compared 

Current accounts

There are plenty of current accounts paying better rates of interest on in-credit balances, although you’ll often have to meet a number of criteria to qualify for interest, which will be taxable.

Savers with between £3,000 and £20,000 can earn 3% AER before tax in Santander’s 123 account. Nationwide and TSB also offer top-paying current accounts, both paying 5% AER before tax on balances up to £2,500 and £2,000 respectively.

Find out more: Best rate current accounts – see our tables for more information  

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