Premium bonds are the only savings products offering the chance to win £1m – but most savers will see more modest returns. But how do the other savings deals on offer from National Savings & Investments (NS&I) stack up against the market?
In April, two lucky bond holders from Dorset and Hampshire took home the £1m jackpots. The vast majority of NS&I premium bond holders look forward to much smaller winnings, but premium bonds are not the only products offered by the NS&I.
Which? examines how premium bonds stack up as investments, as well as looking at how competitive other NS&I accounts are.
Premium bonds winners for April 2018
Easter brought a windfall to two men on England’s south coast, as the winners of the premium bond £1m jackpots were announced.
One winner, who lives in the Hampshire and Isle of Wight region, currently has £30,725 invested in premium bonds. He received his winning bond (number 141JM676632) in August 2008 after he opted to reinvest a prize of £50.
The other winner, hailing from Dorset, has £38,320 invested in premium bonds. He acquired his winning bond (number 216YS216548) as part of a £27,800 prize in January 2014.
A total of 3,023,387 prizes were paid out in April’s prize draw, worth £86,418,475. All winning bonds are selected at random by the NS&I’s number generator ERNIE.
- Find out more: premium bonds – everything you need to know
Are premium bonds worth the investment?
Unlike other savings products, premium bonds don’t pay interest. Instead, prizes are awarded based on a random number draw – so your returns are never guaranteed.
Nevertheless, the NS&I estimates that a person with ‘average luck’ generally makes a return of around 1.4% on their investment in premium bonds.
Of course, even if you do achieve the average return, you may take home a £5 prize one year and a £1,000 prize the next.
In February 2018, the inflation rate was 2.7% – meaning a return of 1.4% will see your money slowly erode in real terms. Unfortunately for savers, few products in the market currently offer inflation-beating returns.
It’s also worth keeping in mind that the more you invest, the more likely you are to win, as each £1 bond has an equal chance of winning.
If you invest £1,000 in premium bonds, your odds of winning a prize over a 12 month period are 49%. But f you invest £10,000 or more, your odds are close to 99.99% – though the prize may be as small as £25.
- Find out more: how many premium bonds should you buy?
How do other NS&I products stack up?
While premium bonds tend to grab attention, the NS&I also offers a range of more traditional savings products.
With 25m customers, the NS&I remains one of Britain’s most popular providers – but how do their savings rates compare to other deals on the market?
Below, we explore what the NS&I offers and how the deals compare to the market-leading rates for comparable products. We’ve limited our search to products that are open to new customers.
Keep in mind that NS&I products are 100% backed by the Treasury – meaning all deposits are fully protected.
By contrast, most other banks are protected under the Financial Services Compensation scheme, which offers protection for up to £85,000 per person per provider (or by an EU equivalent). If you’re depositing more than £85,000, the NS&I might therefore be an attractive option.
- Find out more: how to find the best savings account
Best easy-access savings & Isas
If you have £20,000 to deposit, but you’d like to be able to access your money, NS&I offers a range of products.
But you could earn more interest by opting for a different provider – RCI Bank, for example, pays 1.3% on deposits.
It’s worth noting that deposits with RCI are not covered by the Financial Services Compensation Scheme, but rather by the French deposit guarantee scheme, which protects sums up to £100,000.
|Product (easy-access savings)||AER%||Min. deposit||Max deposit||Interest earned on £20,000 over a year|
|NS&I Direct Saver||0.95%||£1||£2m||£190|
|NS&I Income bonds||1%||£500||£1m||£200|
|NS&I Investment account||0.7%||£20||£1m||£140|
|Market-leader: RCI Bank UK Freedom Savings||1.3%||£100||£1m||£260|
Source: Money Compare
If you’d prefer to the deposit into an ISA to benefit from the tax-free wrapper, the NS&I offers a cash Isa paying 1%. Alternatively, you could earn 1.25% interest at Paragon, which is the best rate currently on offer for easy-access cash Isas (excluding Help to Buy products).
|Product (easy-access cash Isa)||AER%||Min. deposit||Max deposit||Interest earned on £20,000 over a year|
|NS&I direct Isa||1%||£1||£20k||£200|
|Market-leader: Paragon Easy Access Cash Isa||1.25%||£1||£20k||£250|
Source: Money Compare
Best fixed-term savings rates
If you’re prepared to lock your money away for a period of time, you can earn higher interest. The products below all pay interest annually – and while the NS&I is competitive, other deals could potentially offer higher returns.
|Product (fixed-term bonds) – interest paid annually||AER%||Min. deposit||Max deposit||Interest earned on £20,000|
|NS&I 1 Year Guaranteed Growth Bond||1.5%||£500||£1m||£300|
|Market-leader: Al Rayan Bank fixed term deposit||1.86%||£1,000||N/A||£372|
|NS&I 3 year Guaranteed Growth Bond||1.95%||£500||£1m||£1,193|
|Market-leader: Vanquis Bank 3 Yr Fixed Rate||2.3%||£1,000||£250k||£1,412|
One NS&I Product, the 2 Year Investment Guaranteed Growth bond, will only be available until 10 April. Deposits into this bond are also limited to £3,000.
But the rates are close to the top of the market, just 0.1% behind market-leader Vanquis Bank.
|Product (fixed-term bonds) – interest paid annually||AER%||Min. deposit||Max deposit||Interest earned on £3,000|
|NS&I 3 Yr Investment Guaranteed Growth||2.2%||£100||£3k||£202|
|Market-leader: Vanquis Bank 3 Yr Fixed Rate||2.3%||£1,000||£250k||£212|
Source: Money Compare
This page was updated at 11am on 3 April to reflect new information on how one of this month’s winners purchased his winning bond.
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