Premium Bonds turn 60: are they still worth buying?
Today marks 60 years since the first Premium Bonds were launched in the UK, making 350 people millionaires in the last six decades.
Then Lord Mayor of London, Alderman Sir Cuthbert Ackroyd, bought the very first Premium Bond on 1 November 1956 and £5m worth were sold on the first day alone.
Since then, more than 21 million customers have held over £63bn worth of the bonds and 355 million people have won a collective £17bn.
Administered by National Savings & Investments (NS&I), Premium Bonds are much like savings accounts, but with one big difference: instead of a reliable interest rate your returns are determined by a monthly lottery.
While the bonds themselves don’t earn any interest, the annual prize pot, which is currently 1.25%, is used to fund the monthly prize draw. The gains on Premium Bonds are tax free.
The odds of each individual bond number winning any prize are 30,000 to 1.
While the product hasn’t changed much in 60 years, people now buy their bonds online, over the phone or by post rather than at the Post Office, and the top prize has changed from £1,000 to £1m.
Jill Waters, retail director at NS&I, said: “Over the last 60 years, Premium Bonds have become a part of the fabric of British life with almost a third of Britons now holding the product.
“When they were first introduced in 1956 they changed how the nation saved and, over time, have increasingly become a part of many savers’ portfolio.”
Worth buying today?
Money expert Andrew Hagger of Moneycomms.co.uk says Premium Bonds are “still a decent option” in today’s ultra-depressed savings market.
“The prize pot is not as generous as it once was (equivalent to 1.25% at present) but it’s 100% safe, there’s always the chance you’ll pick up the odd £25 from time to time and if you’re very lucky something a bit more exciting,” he says.
“Unlike spending money on the National Lottery you’re always guaranteed to get your stake back so with banks and building societies paying next to nothing these days, Premium Bonds aren’t a bad home for some of your nest egg.”
The way to earn more is to tie your money up for longer or take on extra risk.
A two-year fixed rate savings bond from Charter Savings Bank (fully FSCS protected) pays 1.51%, while peer-to-peer provider RateSetter is paying 2.8% on its 30 day rolling account (but has no FSCS protection).