I’m stockpiling premium bonds despite a 0% return over two years, says LEE BOYCE, but they’re not right for everyone…

Last week we recorded the 10th anniversary episode of the This is Money podcast in front of a live audience.

At one point, we talked about premium bonuses and I joked that I was hoarding them, a slang term made popular in the cryptocurrency world, meaning don’t sell your bitcoins, ethereum, and co. when prices drop.

In other words: hang on for dear life.

And that’s what I’m doing with Premium Bonds. Although my wealth held in the NS&I savings product does not potentially fall like volatile cryptocurrencies, inflation erodes it by not earning a consistent return.

The average holding of premium bonds is £5,250, and around 24 million people hold them; many of course top out at £50,000, many others will be under £100, potentially purchased as early as the late 1950s.

They have been in the news again recently, with the average award payout rate falling to 4 percent from a recent high of 4.65 percent, the third cut since March and back to the August 2023 level.

Premium Bonus Winners

Prize	Area	Bonus value
£1,000,000	kent	£49,950
£1,000,000	cumbria	£10,000
£100,000	kent	£50,000
£100,000	Croydon	£5,000
£100,000	Northern Ireland	£10,000
£100,000	Wiltshire	£49,999
£100,000	West Midlands	£50,000
£100,000	Essex	£32,420

More winners from December 2024

See list of December 2024 winners

The odds of a £1 Premium Bonus winning any prize are 22,000 to one. The more you have, the more likely you are to win a monthly prize.

My personal profitability since opening them two and a half years ago is 0 percent. That’s right, I’ve never won an award.

I should note here that I’m just shy of the average amount, with my two biggest investments coming in mid-2023 and early 2024.

With half luck, I should have won *something*, but alas, I haven’t.

‘Move your money, moron’ has crossed my mind several times in recent months, and the drop in the prize payout has brought it into sharper focus.

But the thing is, no regular savings product offers the monthly thrill of winning big, probably the main reason people don’t feel the need to move unless the rate really drops.

Plus, you can withdraw your bet at any time, unlike, say, the lottery, which I rarely participate in.

Getting back to the live podcast, after the show was recorded and I mingled with some of the audience, this is what listeners asked me the most and told their own stories about premium bonds.

In short, it is clear that we Brits are very fond of them and, since we like the weather, they are also a big topic to complain about.

Most of us also know a friend of a friend who won a big prize in Premium Bonds. Earlier this year, an acquaintance of mine told me that her mother had won £50,000.

It’s hope that catches you.

Premium bonds make up a fraction of my savings, investment and pension portfolio. The mainstay should always be your pension, along with Isa savings, both in cash and stocks and shares.

And although I’m nowhere near maxing out my £20,000 annual allocation, I still like to be in the running to earn it with the premium bonuses.

They’re a perfect home for those who are maxed out in terms of their Isa allowance and have built up a tidy pension pot – capped at £50,000, plus tax-free awards and a government-backed guarantee, it’s a no-brainer.

In fact, there are now almost 1.2 million maxed premium bonuses, which is part of the reason it has become harder to win with smaller stakes.

At the other end of the spectrum, if you’re just starting your savings and investing journey, they’re probably not the right place for your cash – start with a regular saver, build up a fund, then build a diverse portfolio, and then consider it.

Yes, sometimes people make a lot on less than £1000, but they are the exception, not the norm.

In fact, in the last draw, the average entry for someone who won £100,000 was £41,141 and for £50,000 it was £40,813.

Looking at draws from the last 12 months, the average holding of a £1 million winner is £36,949 less. But no-one with a stake of less than £10,000 has won the top prize this year, and nine of the £1m winners had the maximum of £50,000.

In my opinion, there is one exception that justifies small holdings, and that is for children…although some financial experts might disagree.

Yes, the money would be better served in a Junior Isa or stocks and shares Isa, but in my opinion, premium bonds as an alternative gift for birthdays and Christmas are more acceptable than another unnecessary toy from family and friends.

The money is unlikely to grow much with small amounts coming in, but over time, it will at least add up, and from experience, grandparents can better understand premium bonds than money being diverted elsewhere.

So should I sell them all and buy them back? That’s a classic myth in the world of premium bonds… that somehow numbers bring bad luck, especially among those who bought them decades ago.

But by doing that, I will only miss a tie, and all bonuses have an equal chance of winning. It’s just that people are now more likely to buy them in large quantities, compared to a few pounds here and there in the 1950s and 1960s.

You can read an article on premium bond conspiracy theory that I helped put together a few years ago.

For the foreseeable, I will be holding. What are your Premium Bonus plans? Let me know: lee.boyce@thisismoney.co.uk