Are premium bonds a good investment?

Our Founder & CEO Holly Mackay weighs in on the pros and cons of premium bonds and whether they're worth investing in.

What's the fuss about premium bonds?

Spoiler alert - a while ago I wrote a piece on premium bonds with a chocolate teapot as the picture. They disguise themselves as a sensible, safe thing to do with your money but in fact offer relatively poor and uncertain returns.

The total annual prize money is currently calculated at 3.80% of the total, but of course you’re not guaranteed to get anything. The odds of winning are 24,000 to 1 (for every £1 bond). For comparison, the lifetime odds of being struck by lightning in the US are 1 in 15,300! Don’t kid yourself - most people won’t get anything like a 3.80% return on their money and have an almost negligible chance of winning the big £1 million prize.

Cash’s job is to be safe, known and steady. It’s a good home for shorter-term money when you can’t take the ups and downs of the stock market. If you like the safety of the government-backed NS&I, it's currently paying 3.30% on its Direct Saver. Would you rather get a guaranteed 3.30% or take a 24,000 to 1 punt that you might get something?