Should you invest in... Premium Bonds?

More than 22 million people have money invested in Government-backed body National Savings & Investments’ (NS&I) premium bonds

Premium bonds are still very popular with parents and grandparents looking to build a child’s nest egg, despite the introduction of big-prize lottery draws in recent decades.

More than 22 million people have money invested in Government-backed body National Savings & Investments’ (NS&I) premium bonds.

Each £1 bond is entered each month into a draw with a top prize of £1 million, with nearly two million bonds winning smaller amounts between £25 and £100,000.

However, NS&I, which has a remit to have rates that reflect but do not lead the market, has announced that it is cutting the monthly prize fund and the odds of any £1 bond winning will widen from 24,000 to 1 to 26,000 to 1.

The total prize fund for one month is set by calculating one month’s interest on the total value of all eligible bonds. The rate is being cut from 1.5% to 1.3%, meaning the August prize fund will be £49.3 million, edging down from £57.1 million in July. The number of prizes is dropping from just over 1.9 million to 1.75 million, reducing the chances of winning overall.

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