Premium Bonds holders are being advised to review their accounts ahead of significant changes to ensure they get the best possible results. Those who haven’t won any prizes recently may be wondering if it’s time to withdraw their investments.
The monthly prize draws offer exciting potential rewards—including £50,000, £100,000, or even the £1 million jackpot. However, winning is entirely based on chance, and some savers may go months, years, or even decades without a prize. The current prize fund rate stands at 3.6 percent following three reductions by NS&I throughout 2025. Each £1 Bond carries long odds of 1 in 22,000 for winning. Most prizes tend to be small amounts like £25 or £50, which may yield lower returns compared to other investments or interest-bearing accounts.
Financial experts are weighing in on whether Premium Bonds still represent a viable savings option or if funds should be relocated. Kate Steere, a money expert at personal finance platform Finder, cautions that for many, Premium Bonds may not be the best choice. “Despite offering security and tax shelter, Premium Bonds carry the risk of earning nothing,” she said. “With inflation holding firm, savers’ cash can slowly lose value.”
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Additionally, Chancellor Rachel Reeves announced in the Autumn Budget 2025 a reduction in the ISA allowance: from April 2027, only £12,000 of the £20,000 annual ISA limit can be put into cash ISAs, with the remaining £8,000 required to be directed to stocks and shares ISAs. Steere notes that cash ISAs still generally deliver better returns than Premium Bonds. Highlighting examples, she says savings apps like Moneybox and Plum are offering inflation-beating rates over 4.3% for new customers.
Will Stevens, partner at investment firm Killik & Co, points out that Premium Bonds remain attractive for those beyond their ISA limits or seeking short-term holdings. He emphasizes their appeal as government-backed, tax-free, and secure, especially if bank interest rates are low or funds exceed the Financial Services Compensation Scheme (FSCS) protection limit of £120,000 per institution. However, he warns that returns can be unpredictable and suggests that other government debt instruments, such as low-coupon gilts, may offer steadier, tax-efficient income.
For long-term growth, Stevens advises considering more growth-focused investments if funds are not required for at least five years. Helen Morrissey, head of Retirement Analysis at Hargreaves Lansdown, acknowledges that many savers hold Premium Bonds for sentimental reasons and the allure of a big win but encourages exploring other savings options for better returns. She highlights Junior ISAs as a superior option for young savers, offering tax-free growth and income with greater potential to outpace inflation over five to ten years.
Older savers nearing retirement may question whether to keep their Premium Bonds. Stevens suggests that while there are more efficient short-term cash storage options, Premium Bonds can be a useful part of a diversified portfolio. Morrissey adds that retirees should consider market-wide interest rates and investments to preserve purchasing power, with Premium Bonds offering security as a Treasury-backed safe haven.
With FSCS protection now increased to £120,000 per person per institution, savers are encouraged to diversify and review their options to maximize returns and protect their funds in line with evolving ISA limits and market conditions.