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Are Premium Bonds worth it in 2022? With a chance to win £1m you might be surprised about the answer.
Is it worth buying Premium Bonds in 2022? It’s a question that many of us have considered before handing over our money to buy them and those looking for ways to increase our savings while at the same time have that chance of winning one of the monthly £1m prizes.
It’s the beginning of a new year and opening up the NS&I I’m met with a sorry not this time message, so this is definitely something I have considered and still considering now.
This post will give you some pros and cons of holding them so that you make an informed decision before joining the other 21m people that have already invested £80bn+.
What is a Premium Bond?
Issued by the NS&I, an Executive Agency of the Chancellor of the Exchequer, premium bonds are savings products.
Every month a prize draw gives those holding bonds the chance to win a minimum of £25 up to £1m, tax-free.
Unfortunately, as a result of there being a prize draw the money you invest does not earn interest.
What are the Pros & Cons of Premium Bonds?
While I don’t think that they are now worth investing in, that doesn’t mean that there are no pros and cons to investing in them.
+ Potential to win £1m
+ Tax-free
+ Instant access
+ Your money is government-backed, so there is no chance of you losing it
– You’re unlikely to win
– They don’t earn you any interest
– Loss of value due to inflation
Who would benefit from buying Premium Bonds?
Having addressed the pros and cons, there are some that should consider them as an option.
- Those that have the maximum to put in and aren’t bothered about the loss due to inflation
- Those that already invest elsewhere, such as an ISA and assets
- Those that have an emergency fund and don’t mind losing interest for the chance of winning £1m
You can buy premium bonds online on the NS&I website, or over the telephone, by completing an application form and sending it with a cheque to NS&I or by bank transfer or standing order.
The most that you can currently put into Premium Bonds is £50,000 with the minimum purchase being £25.
There are three levels of prize available, high, medium and lower values.
5% of the total prize fund is allocated to the Higher and Medium tier with the remaining 90% being allocated to the lower tier.
Below is how NS&I estimated the number of winners for each tier for January 2023.
| Estimated No. of Winners | |
| High value | |
| £1m | 2 |
| £100,000 | 56 |
| £50,000 | 112 |
| £25,000 | 223 |
| £10,000 | 559 |
| £5,000 | 1,118 |
| Medium Value | |
| £1,000 | 11,983 |
| £500 | 35,949 |
| Lower value | |
| £100 | 1,160,883 |
| £50 | 1,160,883 |
| £25 | 2,621,112 |
What are the odds of winning?
For every £1 bond that you hold, the odds of winning are 34,500 to 1.
How much do you need to hold to stand a chance of winning £1 million
NS&I would like you to believe that it doesn’t matter how much you hold to stand a chance of winning one of the two million pound prizes, but having looked at the winners for 2022 so far you can see that they have substantial holdings in premium bonds.
| Month | Winner 1 | Winner 2 |
| Jan | £50,000 | £50,000 |
| Feb | £20,002 | £50,000 |
| Mar | £36,000 | £19,000 |
| Apr | £49,995 | £50,000 |
| May | £50,000 | £49,000 |
| Jun | £10,001 | £50,000 |
| Jul | £30,600 | £22,350 |
| Aug | £45,000 | £22,875 |
| Sept | £50,000 | £50,000 |
| Oct | £50,000 | £50,000 |
| Nov | £15,000 | £25,253 |
| Dec | £45,000 | £29,042 |
In fact, the moneysavingexpert has shown that the odds of winning £1m as of April 2022 was 1 in 58,581,896,319.
To put that in perspective the odds of winning the jackpot on the lottery are 1 in 45,057,474, though you do lose your £2 playing the lottery, whereas you value of your holding in premium bonds is lost as a result of inflation.
How can you check whether you have won
You hold premium bonds because hope to win big so being able to check is something that you’re going to want to do when the draw has taken place.
Luckily there are a number of ways that you can check.
The Premium Bonds app
This app not only tells you whether you’ve won or not and how much, but it will also show you your prizes in the past six draws, any unclaimed prizes that you might have
The NS&I website
The website has a premium bonds prize checker, just enter your holder’s number and it will show you if you’ve won anything in that month.
Carrying out an internet search
If you search “premium bonds prizes #month year# then you will often get a number of publications telling you where the winners are from, and the value of the bond.
How is my prize paid?
If you’re lucky enough to beat the odds and win a prize then you have two options available on how to receive your prize.
Option 1
Any winnings are reinvested into Premium Bonds.
Option 2
Winnings are paid directly into your bank account.
Money that you’ve saved into premium bonds forms part of your estate when you die so the executor of your will cash in your bonds and distribute it in accordance with your wishes set out in your Will
What if you don’t have a Will
If you don’t have a Will, you have died intestate and as a consequence, an Administrator will need to be appointed to manage your estate and will distribute your bonds and everything else that makes up your estate in accordance with the rules of intestacy.
How do you cash in Premium Bonds?
There might come a time when you have invested in bonds that you either want to cash in everything that you have saved or just some.
If you have a registered online account with NS&I, which I recommend that you do, then cashing out is easy, and is done with the click of a button.
Alternatively, you can either phone them. If you don’t have an online account there is a form that you can fill in and they will process it according to your instructions.
If for whatever reason, you only want to cash in certain bonds so others are left in the draw, this is also an option, but you will have to complete another form
It takes around 3 banking days to get your money back into the account registered with NS&I.
Will I be cashing in the Premium Bonds that I hold?
I have a few thousand pounds saved in Premium Bonds and am now thinking that it’s time that I start cashing in some of these bonds and putting some into my Stocks and Shares ISA.
While I understand that I could potentially lose money in this type of ISA, having my money sat in Premium Bonds means that its value is being decreased by inflation anyway.
I see my ISA as a long-term investment and as a result do not generally take much notice of whether its value has decreased as it could do up or down, while I’m writing this, it’s a few hundred pounds up.
I’ve recently also been considering whether I should put some money into a SIPP (Self Invested Personal Pension).
The State pension as of writing is £179.60 per week, which will certainly change by the time I get to retirement age, and I’m in a company pension scheme.
SIPPS seem to be quite complicated, so I’d recommend that if you’re unsure that you seek a professional’s advice, but of course, you will have to pay for this.
Conclusion
Premium Bonds hold no value for the average saver and for that reason I don’t think that they are still worth buying.
Instead, the average saver should look at what alternatives there are out there, I currently have some bonds and am now looking at cashing in a large portion of these.
There are some that would benefit from investing in them, i.e. those that are able to invest the maximum and have already invested in an ISA and other assets. However, it’s likely that these people also pay professionals to assist them in their financial planning so the decision is possibly made that little bit easier for them.
Do you hold any Premium Bonds? If so what are your long-term plans for them, do you intend to keep them invested or cash them in to explore your options, I’d love to hear your thoughts on the matter.
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