Savings experts have hailed traditional savings accounts over Premium Bonds, despite the latest boost to winning odds.
Following consecutive interest rate hikes, savings account operators have been under pressure to offer better interest rates, resulting in the leading rate on easy access savings accounts rising to 4.75% currently.*
This has forced the body responsible for Premium Bonds, National Savings and Investments (NS&I), to improve their offering to remain competitive, with the odds now standing at 21,000 to one – the highest level for more than 15 years.
This means that there will be 90 prizes of £100,000 in the monthly draws of all investors who have purchased bonds, compared with 77 at present and up from just six in May last year.
However, savings experts at money.co.uk/savings-accounts reveal that traditional savings methods, like easy-access savings accounts and ISAs, still remain a good option for reliable and consistent savings.
Lucinda O’Brien, expert at money.co.uk savings accounts, said: “Despite Premium Bonds offering the chance to win tax-free money, swapping regular interest for a chance to win money in monthly prize draws means you are likely to be missing out on savings.
“The odds aren’t in your favour when you compare 21,000 to one, to earning interest on your savings 100% of the time in a typical savings account, as only the minority win on Premium Bonds and even then it may only be a small prize amount.
“You also have to wait a full month before you’re eligible to win, whereas you start earning interest straight away in a normal savings account.
“Many people are attracted by the fun and exciting ‘lottery effect’ of Premium Bonds but when you consider these points, they are not so great in terms of returns.
“Despite the increased number of prizes, there are still only two winners each month of the £1m jackpots – out of the 22 million investors who hold Premium Bonds.
“If you want to generate a more reliable income from your money, you might want to consider a traditional savings account, cash ISA or investments, including stocks and share ISAs.
“Otherwise you might be waiting for a cash injection that never comes and miss out on years of savings earned gradually in interest.”
For more information and guidance on saving, visit: at money.co.uk/savings-accounts
