Premium Bond holders typically wait at least three-and-a-half years to win a prize
Premium Bond holders typically wait at least three-and-a-half years to win a prize – and, even then, nine in ten take home less than £1,000, figures reveal.
Each £1 bond purchased from the Treasury-owned bank National Savings & Investments (NS&I) has only a 22,000-to-one chance of winning, with the average return 3.8 per cent a year.
This is less than in a high-interest instant access savings account that can pay out more than 4 per cent.
The long waiting times, revealed through a freedom of information request by the wealth manager Octopus Money, are more likely to be experienced by savers with a low number of bonds.
The prize fund lottery pays out tax-free prizes of between £25 and £1 million every month.
Some £131.4 billion is deposited by 22.5 million bond savers. And about 440,000 holders won a prize for the first time last year after waiting three years, six months on average.
This will come as a blow to the third of people who expect to pick up prizes within six months, according to an Octopus Money survey.
Since the minimum prize is £25, it's impossible to get a return of 3.8 pc on small amounts such as £100 – each month you would either win nothing and get a return of 0 per cent, or win £25 or more and get a return of 25 per cent or higher.
Last month 5.9 million prizes were given out, meaning 131.39 billion bonds won nothing. In the past five years, 94 per cent of Premium Bond jackpot winners held more than £10,000 in their account, while 75 per cent held more than £25,000.
The main reason for investing in Premium Bonds is the perceived lack of risk in losing the initial investment, according to Octopus Money, followed by the tax-free status of prizes and the possibility of a large return.
Ruth Handcock, chief executive of Octopus Money, says: 'Premium Bonds work well for some, but others are missing out on alternative strategies that could grow their wealth and hopefully deliver stronger returns over time.
'Premium Bonds are unlikely to outpace inflation, so your money may seem safe but it's shrinking in value over time.'
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