Premium Bonds holders could be losing out on thousands of pounds in potential returns compared to other savings and investment products, according to a new analysis by Fidelity International. The data, obtained from NS&I, shows that savers typically hold their Premium Bonds for around ten years, but this loyalty may come at a significant cost.
Fidelity calculated that a £5,000 investment in Premium Bonds a decade ago would have grown to just £6,190 based on average prize fund rates. In contrast, the same amount invested in global equities would have surged to approximately £15,900, leaving savers facing a potential shortfall of £9,710. Even a fund tracking the FTSE 100 would have grown the £5,000 to about £11,600 over the same period.
Jemma Slingo, pensions and investment specialist at Fidelity International, said: “Premium Bonds can play a useful role in a balanced financial plan. They offer capital security and tax-free prizes, making them a good option for short-term savings or an emergency fund. Where savers need to be careful is over longer time horizons. While your money is safe in cash terms, inflation can steadily erode its real value, and returns from Premium Bonds are uncertain as they depend on prize draws.”
An NS&I spokesperson defended the product, stating: “Premium Bonds are a fun way to save and offer customers the certainty of getting back the full amount they put in, along with the chance to win tax‑free prizes every month. By contrast, the value of some other forms of investments can go down as well as up, and investors may get back less than they originally invested.”
NS&I recently announced an increase in the Premium Bonds prize fund rate from 3.3% to 3.8% from July, with odds of winning improving to 22,000 to 1. However, Fidelity warns that for long-term goals, such as saving for children, investing in the stock market may offer greater growth potential.
