The £121.57 Premium Bond trap: why you should ALWAYS buy the beloved NS&I product by the end of the month
- On average, over £2 billion worth of Premium Bonds are bought each month
- Research shows that buying at the beginning of the month is not a good idea
- Premium bonds pay no interest, so you could miss out if you leave early
Our love affair with Premium Bonds is strong. They are the country’s most popular savings product 21 million people who collectively hold 121 billion eligible bond numbers.
In the 2021/22 financial year, NS&I reported gross inflow of £24.7 billion from Premium Bond clients.
That equates to over £2bn of Premium Bonds purchased each month.
However, those who put money into Premium Bonds need to think tactically about when to do so – otherwise they could face a huge fine.
Pitfall: Early Premium Bond investors could miss out on a significant portion of lost interest by buying early – especially those who are maxed out.
People can purchase Premium Bonds on any day of the month to qualify for the next draw. This is not next month, but the one after.
For example, people can buy Premium Bonds anytime before April 30 to enter the June draw.
This means that those who bought Premium Bonds on April 1 would still only be in the June draw.
This means that early investors could miss out on a significant portion of lost interest in the meantime, especially those taking maximum advantage.
Premium bonds pay no interest, unlike easily accessible savings accounts – the best of which now pay 3.65 percent.
– View the tables with the best savings rate from This is Money here.
Putting £50,000 into Premium Bonds on April 1 would effectively be dead money for a month.
Instead, if someone waits until the end of the month and puts the money into one of the best accessible accounts in the meantime, they could earn over £100 in interest.
If you cut it too fine, you risk missing out on next month’s prize draw altogether, so it’s worth leaving a few days free just to be on the safe side.
We asked experts at the Savings Champion website to find out how much Premium Bond depositors are missing out on by buying bonds at the beginning rather than the end of each month.
Assuming they deposit the money into an easily accessible account and pay 3.55 per cent, £50,000 for 25 days will yield £121.57 in interest, while £10,000 for 25 days will yield £24.32.
Savings Champion calculated it based on 25 days to have some leeway to transfer the money.
| Depositing Premium Bonds | Savings rate | Amount of days | Obtained interest |
|---|---|---|---|
| £50,000 | 3.55% | 25 | £121.57 |
| £20,000 | 3.55% | 25 | £48.63 |
| £10,000 | 3.55% | 25 | £24.32 |
| £5,000 | 3.55% | 25 | £12.16 |
| £1,000 | 3.55% | 25 | £2.43 |
How Premium Bonds work?
Premium Bonds pay out prizes ranging from £25 to £1 million each month. The average price fund percentage is 3.3 percent.
This is not an interest rate, but refers to the average rate of return that Premium Bondholders can expect from prizes.
Of course, in reality, they may end up doing better or worse than the prize money, depending on how lucky or unlucky they are.
It was revealed last week that the luckiest Premium Bond winner ever has taken home a total of £1,019,850 across 288 prizes since buying their first bond in May 2004.
NS&I pays out approximately £330 million in prizes each month, ranging from £25 to £1 million to bondholders.
The odds of winning a monthly prize with a £1 bond are currently set at 24,000 to 1.