How long does it take to get money out of Premium Bonds?

I am thinking of switching my rainy day savings fund to Premium Bonds now that the price fund rate has increased to 3 percent.

I know this return is not guaranteed but it compares well to the most accessible savings rates and I believe Premium Bond prices are tax free, is that correct?

If I need to withdraw, how long does it take to withdraw from Premium Bonds?

Ed Magnus of This is Money replies: First, you’re right, Premium Bond prizes are tax-free – something that makes them look even more attractive with the new prize rate and allows them to be compared to the top money Isas.

But can Premium Bonds be considered akin to easy access savings accounts? No doubt they do, as they allow you to withdraw your funds on-demand and without penalty, but as we explain below, you may have to wait a few days.

With a price fund rate of 3 percent, Premium Bonds could prove to be a more exciting home for your rainy day savings fund.

By comparison, in terms of the best deals, Zopa Bank currently pays 2.86 per cent into its easily accessible account, while the Yorkshire Building Society’s Rainy Day Saver pays 3 per cent, but this is very limited as that rate is only paid on the first £5,000 in the account. You can see the best easily accessible savings rates in our tables.

No doubt the Premium Bonds percentage is a good match for this, but remember that prizes are not guaranteed and you may do better or worse than that average rate.

Instead of earning a fixed interest rate, with Premium Bonds you enter a drawing every month for the chance to win a cash prize ranging from £25 to £1 million.

How long does it take to withdraw money from Premium Bonds?

As for withdrawals, NS&I says if you plan to use the phone or online channel, the money should be in your bank account within two business days, provided it receives your instruction to withdraw at 8 p.m. on any given day.

Those who place their instructions on Thursday, Friday, Saturday or Sunday will therefore have to wait longer for their money during the weekend.

For example, if you request a withdrawal before 8 p.m. on Friday, you will have to wait until the following Tuesday to receive your money.

If you use the post, processing by NS&I will still take two business days, but once NS&I receives your instruction by post, it will likely take longer.

Fortunately, there is a very handy one withdrawal calculator on his website which should also prove useful.

We spoke to a spokesman for The savings guru to see if they can offer our reader a little more insight.

Is the NS&I Withdrawal Calculator Accurate?

The savings guru replies: The NS&I calculator is correct and works accordingly. It uses BACS to make payments, which can take up to three business days.

This is certainly something depositors using Premium Bonds should be aware of when withdrawing, especially on weekends.

Because someone who withdraws money on Saturday morning will only see the money in his account on Wednesday.

How does NS&I compare to other savings providers?

The savings guru replies: NS&I is slower on premium bonds compared to instant savings providers. There is a wide variation in timeframes, with Chase being almost instant, while app-based providers Zopa and Tandem, which use open banking, are very fast.

Officially they are in two hours, but both are usually ready in a few minutes.

Typically, most payments are made through Faster Payments, which usually take up to 2 hours, but it’s worth checking with each provider as not all accounts are created equal.

For example, RCI Bank pays out the next day if they receive your withdrawal before 2pm – but otherwise it’s a different day.

An RCI saver who cancels at 3pm on Monday may not see their money in their account until the end of the day on Wednesday.

Any other words of advice?

The savings guru replies: As to your reader question, your saver is correct that the 3 percent prize pool compares favorably with the top savings rates.

But remember, this is an average, so to pay the £1 million prizes means other savers get nothing.

So a saver with a cap of £50,000 and average average profits will get £1,000 a year, which is a 2 percent return.

I always say Premium Bonds are better than the lottery, and they’re great for that thrill whether you win a prize or not.

However, only use them if you’re happy with not getting anything each month – because unless you’ve saved £13,000 or more, chances are it will.