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Premium Bonds fail to beat top savings accounts

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Dan Plant
Dan Plant
Editor
1 November 2007

On November 1, the winners of National Savings & Investments monthly Premium Bonds draw were announced, along with the prize distribution used in November's draw. This information has been plugged into MoneySavingExpert.com's specially designed Premium Bonds Calculator, which shows how much any bondholder is likely to win based on the amount they hold and how long they intend to keep it in there

Crucially, it also compares these winnings to what they'd be guaranteed to make in a top savings account, and to inflation (the rate at which prices rise). By using its multinomial distribution method, devised by a post-doctoral cosmology staistician, the calculator uncovers the poor performance of Premium Bonds as an investment, revealing that a massive majority of bondholders would be better off with their cash in a savings account.

Martin Lewis, the creator of MoneySavingExpert.com, comments:"The results are shocking. 88% of people holding the maximum £30,000 worth of premium bonds for twelve months won't beat the top savings account if they are a basic rate taxpayer. Even worse, only 28% will beat inflation, meaning that far from making them a millionaire, their money is in fact shrinking. Premium Bonds are OK for a flutter, but don't be duped by the excitement of 'winning'. Over half the people who hold £1,000 in them will win absolutely nothing over a year; put that in the top ISA and you're guaranteed to make £63"

Try the Premium Bonds Calculator:https://www.moneysavingexpert.com/savings/premium-bonds-calculatorRead the full article on whether Premium Bonds are worth it: https://www.moneysavingexpert.com/savings/premium-bonds

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