NSI Premium Bonds

missile

Hi,

I am a basic rate tax payer and expect to pay tax on my savings

I have £79,000 in SAGA easy saver earning 4.5%

Would I be better to move £50,00 to NS&I Premium Bonds ?

Please note:

I have maxed my ISA for 2026/7

I am not interested in any risk / longer term investment

Many thanks for reading and appreciate any advice

droopsnoot

Have you read the article on the site about Premium Bonds? The key thing is that you might possibly win nothing at all - it's unlikely with the full amount of £50k in there, but it's possible - there's no way to calculate what actual return you'll get. On the flip side, of course, you might win a million and then it was worth it.

missile

Thankyou for your comment.

Yes, I have read the article and appreciate that it is a gamble. However the odds are in my favour. With a 4.35% prize fund, I should win more than 4.5% after tax = circa 3.6%.

I estimate £2175+/- vs £1800 (guaranteed)

Worth a punt?

Isthisforreal99

https://forums.moneysavingexpert.com/discussion/comment/82108967#Comment_82108967

What makes you think you 'should' win anything?

For context I had £50k in for 6 months. Won £100 then moved it out for guaranteed income. If you are prepared to have £0 return then by all means.....

You can also beat your currrent 4.5% savings rate.

SacredStephan

Remember that you have to wait at least a month after buying your PBs before they are entered in a draw.

Swipe

To avoid disappointment with the full holding of £50K in PBs, I'd expect at least one month per year where you don't win anything.

LeafGreen

£100 total winnings on £50K holding over 6 months is exceptionally unlucky, by contrast I have had 21 prizes totalling £1450.

The way I look at the odds is that every bond has a 21,000 to 1 chance of winning a prize. The prize could be any amount, but is very much most likely to be a lower value prize of £25/£50/£100 (note £50 and £100 are actually more likely to appear than £25).

So, if you had £21,000 in bonds you could reasonably expect over the long term to be getting on average 1 prize per month. Given the distribution of lower value prizes this averages out to approx. £62 per prize, if my maths is correct. If you have £42,000 bonds, 2 prizes per month on average would be £124, and with £50K of bonds a little more, lets say £147.

Clearly nobody can get exactly £147 per month, but the more bonds you have and the longer you hold them for, the closer you should get to the average. It's just like rolling a dice or flipping a coin - if you only do it a few times, you will probably not see an even distribution of possible values, but do it 100s or 1000s of times and you will.

Anyway, on the basis of this £147 per month (any bigger prizes would be a bonus on top of this) that works out to 3.5% return, based on odds for Sept 2026 draw, where the total prize pot will be 4.35%. For a basic rate taxpayer, you'd need to be getting a gross rate of 4.38% to match that after tax - slightly more when the tax rate increases to 22% next year. And of course, a higher rate tax payer even more.

My £1450 over 6 months works out equivalent to 5.8%. It has included a couple of unusually good months which are very unlikely to be repeated with such frequency, and I fully expect to get less as time goes on. Equally I would expect Isthisforreal99 to trend upwards. It's just a matter of time.

Edit to add:- you need to have held premium bonds for 1 calendar month before they go into the prize draw. therefore it's best to buy them a few days before the end of a given month rather than near the start.

subjecttocontract

The main reason that we both hold p.bonds is because the winnings are tax free. The last year up to end of March 2026 we got 3.7%. That beats anything that's taxable I could get elsewhere. It's really down to personal choice. Give it a go and if you don't like the results you're still free to put your money somewhere else.

mrcrumb

The odds of a bond winning are 1 in 21000. The prize rate of 4.35% is just the total prize fund divided by the number of bonds issued (each bond is worth £1) times 100%.

missile

https://forums.moneysavingexpert.com/discussion/comment/82109309#Comment_82109309

I know that it is quote from NS&I site. However that means very little to me. I would suggest 4.35% is a more meaningful measure of the payout.

missile

https://forums.moneysavingexpert.com/discussion/comment/82108971#Comment_82108971

Semantics. Perhaps "anticipate" is better than "should"