Premium Bond alternatives

In this guide, we explore some alternatives to premium bonds and whether these may be a better savings option for you.

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Premium Bonds are a popular savings vehicle.

These bonds don’t pay interest. However, for every £1 invested in Premium Bonds, you’ll get one entry into a monthly prize draw. The top prize is £1 million.

The popularity of these bonds prove that UK savers like the idea of gambling on a large cash prize, rather than receiving a steady regular income.

In this guide, we’ll explore some other savings vehicles that give you a chance to win a large cash prize. We’ll also compare these products to more traditional savings accounts.

Alternatives to Premium Bonds

Here are a few direct alternatives to Premium Bonds.

Halifax Prize Draw

Halifax offers a monthly prize draw to all customers who hold at least £5,000 worth of savings. These savings must be held in Halifax or Bank of Scotland savings accounts or ISAs.

Each customer gets one free entry into the monthly draw.

Every month, Halifax gives away:

  • 3 x £100,000 prizes
  • 100 x £1,000 prizes
  • 1,500 x £100 prizes

Halifax doesn’t reveal how many people enter its monthly draw, so it’s not possible to compare the odds of winning with Premium Bonds.

However, it’s worth remembering that you’ll earn interest on your savings as well as your place in a monthly prize draw, so there is technically nothing to lose.

Nationwide Start to Save prize draw

Every three months, Nationwide holds a prize draw for its “Start To Save” savings account holders.

To be eligible for the draw, your account balance must have increased by a figure between £50 and £100 in the previous 3 months. The idea is that this will encourage savers to keep adding to their accounts.

The prize on offer is £100.

Nationwide says the odds of winning fluctuate between one in 34 and one in 67, depending on the number of entrants.

You’ll earn interest on your savings regardless of whether you win a prize.

Family Building Society Windfall Bonds

If you invest £10,000 in a Family Building Society Windfall Bond, you’ll be automatically entered into its monthly prize draw.

The prizes on offer are:

  • 1 x £50,000 prize
  • 2 x £10,000 prizes
  • 3 x £2,500 prizes
  • 15 x £1,000 prizes

The odds of winning a big prize are significantly better than with Premium Bonds. The odds of winning with Family Building Society are 1 in 714 each month, or 1 in 60 per year.

Family Building Society says that the odds of winning at least £1,000 with 10,000 Premium Bonds are one in 357 per year.

On top of that, you’ll earn interest on these bonds at the Bank of England base rate.

Comparing traditional savings accounts to Premium Bonds

Not sold on the idea of a prize draw? Here is a quick look at how traditional savings accounts compare to Premium Bonds.

Savings accounts and cash ISAs

You won’t earn any interest on Premium Bonds.

The amount of money paid out in prizes per year is determined by the Annual Prize Fund Interest Rate. This is currently 1.40%, dropping to 1% from December 2020.

This is technically the amount that each bond pays out. Premium Bond holders are hoping to earn a lot more, but the majority of them will earn less.

If you prefer to earn a guaranteed amount of interest, find a good savings account or cash ISA that pays at least this amount.

Stocks and Shares ISAs

A stocks and shares ISA is a platform that allows you to invest in stocks and shares tax-free.

Stocks and shares tend to pay higher returns than cash savings in the long run. However, there is a risk that the value of your investment can go down, as well as up.

Peer-to-peer lending

Peer-to-peer lending websites allow you to lend money directly to borrowers without a middle-man. The lack of overheads needed for these websites to run allows them to offer superior rates to most banks.

There is a slight risk of you losing your investment, should the borrower default on their loan. However, most good peer-to-peer lending websites have protections in place to compensate savers in this situation.

We show offers we can track - that's not every product on the market...yet. Unless we've said otherwise, products are in no particular order. The terms "best", "top", "cheap" (and variations of these) aren't ratings, though we always explain what's great about a product when we highlight it. This is subject to our terms of use. When you make major financial decisions, consider getting independent financial advice. Always consider your own circumstances when you compare products so you get what's right for you.

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