Premium Bonds vs Cash ISA

lovereading

Am dithering about withdrawing my premium bonds and putting into cash ISA. I have won £125 over 4 months on bonds worth £11000. How do I compare interest rate of 4.87% to see which would / is giving the higher return please?

LeafGreen

Works out to be around 3.4%

eskbanker

As you say, the annualised return is circa 3.4%, so that's the figure you'd compare with the published interest rate of the cash ISA you'd use instead.  Of course, premium bond returns are highly variable, so you're likely to win less, or more, than that, rather than the same, as 4 months is a very short period over which to measure, but your current run rate is probably fairly representative....

mjm3346

MSE guide

https://www.moneysavingexpert.com/news/2025/06/premium-bond-prize-cut-august/


"

The rate cut makes Premium Bonds even easier to beat elsewhere

For most savers with average luck, accounts that pay interest will now be even more likely to beat Premium Bonds. This is because savings interest is a guaranteed return – so if you get today's top easy-access rate of 4.75% (or 4.92% if you've not yet used up your ISA allowance), you'd get £47.50 (or £49.20) in interest a year for every £1,000 saved."

Mark_d

lovereading said:

Am dithering about withdrawing my premium bonds and putting into cash ISA. I have won £125 over 4 months on bonds worth £11000. How do I compare interest rate of 4.87% to see which would / is giving the higher return please?

I use my ISA allowance for S&S ISA because in my opinion there is little value in a Cash ISA.  How much interest do you think you'd earn if you money was in a Cash ISA?  By my calculation I make it £535.70.  This would be tax free even if your account was not an ISA.
I use Premium Bonds because the money is completely secure and because there's a small hope of winning  a good amount of money.  If I was to add up all my Premium Bond winnings to date then maybe I could have made marginally more money using savings account...but not really a significant amount.

epm-84

Most Premium Bond holders don't win anything above £100 in the monthly draw. The smaller prizes are £25 and £50. You can win multiple prizes the same month but it has to be a multiple of £25. So you could win £100 made up of 4 x £25 prizes.

The prize calculator suggests for £10,000 with average luck you'll get an average of £50 a month, but you'll likely get £0 some months and it's luck, so a low month won't automatically be followed by a high month. You might get an average of £8.33 for the first 3 months, or you could get an average of £75, or if you're really lucky you might get over £1000.

eskbanker

epm-84 said:

The prize calculator suggests for £10,000 with average luck you'll get an average of £50 a month

....which is clearly nonsense, as that would be an annual return of 6%!

I haven't used the MSE calculator for ages as it became too unreliable, but https://premiumbondsprizes.com/detailed#10000 is a more credible one IMHO, which suggests an average luck return of £0 per month (rounding) but £275 per year.

epm-84

I thought the numbers were high from the MSE one but I was too tired to do the % calculations.

GrubbyGirl_2

I have premium bonds because I have exhausted my other tax free options.  Because I have a full holding I do ok and of course I always hope to win big.  If I was starting out I would go for ISAs  in the first instance as they are a more reliable return and I would especially do it at the moment as there is still the risk that the amount you can invest in ISAs will reduce but once he money is in there it should not be affected.