Premium Bond odds plummet along with saving rates

A slash in prize value (and the number of prizes offered) is bad news for investors.

by Gabriella Griffith
Last Updated: 24 Jul 2013
Premium Bonds have just become a less inviting prospect. National Savings and Investments (NS&I) has cut the prize fund attached to the investment option in order to ‘balance the interests of its savers, taxpayers and the stability of the broader financial services sector’. Sigh.
The slash in total prize money will come into effect from 1 August and will see the prize rate drop from 1.5% of the total invested in the fund to 1.3%, causing the monthly value of the prizes to fall from £57m to £49m. The changes will also reduce the number of £100,000 prizes doled out from five to three.
Premium Bond investors won’t welcome the news: instead of earning interest, they  win tax-free prizes. Around £44bn is invested in Premium Bonds by 21.6 million people, making it one of Britain’s most widely owned investments. Premium Bonds were receiving record sums at the height of the banking crisis thanks to Brits’ abject fear of further banking collapses.
The odds of people winning the prize will fall from 24,000 to one to 26,000 to one as of the start of August. It’s not ideal, but given the chances of winning the jackpot in the UK’s National Lottery stands at around 1 in 14 million, MT thinks Premium Bond investors are better off where they are.

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