Some 14 million Premier Bond account holders risk never winning a prize, according to freedom of information request by AJ Bell, with the firm suggesting some may wish to look elsewhere.
The popular savings vehicle is used by millions of people in the UK, drawn in by the potential to win big prizes of up to £1m.
While the odds of winning give savers an implied interest rate of 3.6%, this is variable. In real terms, each £1 bond has a 22,000 to one chance of winning a prize, which can be as low as £25.
And the less money put away, the lower the chance of success. AJ Bell analysis has revealed that two-thirds of savers have never won a prize, with the average holding of these unlucky savers standing at just £106.79.
Laura Suter, director of personal finance at AJ Bell, said: “Put simply, if you’re one of the millions of people with a small amount of money in Premium Bonds, the odds are stacked against you.”
Yet 13.7 million, or 60% of all savers with Premium Bond accounts, have a balance worth less than £100. Together, they represent just 0.1% of all cash held in the savings vehicle.
Conversely, 5% of accounts have the full £50,000 saved up, representing 50% of the total money held in Premier Bonds.
She suggested that many smaller accounts are set up by parents and grandparents who see it as a safe place to store cash for their children and grandchildren in the hopes that they can win a top prize and be set up well for the future.
“Unfortunately, unless they are saving large amounts, they’re unlikely to see that dream become a reality and may not earn any return whatsoever,” said Suter.
Even if savers do win, they may not collect their prize. More than £100m worth of prizes remains unclaimed, with £10m yet to be collected from 2025 draws alone, according to National Savings & Investments, the bank behind the popular account.
“This will be down to a number of factors, but will often be because many people have simply forgotten that they have any money in Premium Bonds, or that they can’t remember the details for their account and don’t fancy spending their time digging around or chasing login details,” said Suter.
For children, rather than putting a small amount into Premier Bonds, family members should consider opening a junior ISA and investing the money, she suggested.
“A parent who had put just £25 a month into the MSCI World index of global companies 18 years ago when their child was born would be handing them £17,700 on their 18th birthday,” she said.
While some will be nervous about investing, “history shows that, over the long term, investing even in something low maintenance such as a global tracker fund can outpace cash and inflation”.
For those who are “uncomfortable” with the idea of leaving money solely in the stock market, she suggested family members could invest in an ‘all-in-one’ fund, which will spread money between different countries’ stock markets and across various asset classes (such as gold, bonds and cash) to lower the risk.
“Ultimately, you need to feel comfortable investing on behalf of a child before making the leap, so it’s important to understand what you’re investing in before doing so,” she concluded.