You have a better chance of being hit by lightning than winning £1m, but Premium Bonds are still a good bet

NS&I is increasing the chances of winning on Premium Bonds again. Here’s how likely you are to get the £1m jackpot…

Premium Bonds are still one of the nation’s favourite savings products and could appeal to even more savers now the prize rate is increasing to 4 per cent from next month. This is the highest level since 2007, and up from the current offering of 3.7 per cent.

Some 21 million people hold Bonds, opting to keep their money safe in a Government-backed bank. Your money is safe even if over the £85,000 that is the limit of compensation you’re entitled to offered if the bank fails.

There is also the chance to win up to £1 million, but just how likely are you to win big on the Premium Bonds? i investigates.

Are you more likely to win big on Premium Bonds or be struck by lightning?

Premium Bonds, offered by the Government backed bank, NS&I, are unlike other investments, where you earn interest or a regular guaranteed return. Instead you are entered into a monthly prize draw where you can win between £25 and £1m tax-free.

The rates have increased multiple times this year, in light of people taking money out of Premium Bonds as the cost of living crisis intensifies. This has meant NS&I has increased the rates you can expect in return to attract more money. The August rate of 4 per cent is the best rate offered in 15 years.

From next month, the odds of winning will improve to 22,000 to 1 from 24,000 to 1, meaning that each £1 Bond will have its best chance of winning a prize in almost 15 years.

However, the chance of winning big money is still unlikely, although the excitement of potentially gaining thousands of pounds keeps people invested.

Dr Michael Dunne-Willows, statistics ambassador at the Royal Statistical Society, calculated the odds of winning the Premium Bonds – and whether you are more likely to be struck by lightning.

He said the chances of winning depend on how many Bonds you hold – with the most you can have fixed at 50,000. The more Bonds you hold, the higher the chance of winning a prize at any amount.

You are much more likely to win a small amount. Winning £25 is about 700,000 times more likely than winning £1m, for example.

The chance of being struck by lightning is 1 in 10 million, according to the British Medical Journal.

The probability of someone with 10,000 Premium bonds winning a prize of £5,000 at least once works out to be about 1 in 1,000. Therefore, winning £5,000 if you have 10,000 bonds is considerably more likely than being struck by lightning.

However, you’re more likely to be struck by lightning than you are to win £1,000,000 if you hold just 100 premium bonds. If you hold 1,000 or more, you are statistically more likely to win than be hit by lightning.

The chanced of being struck by lightning is one in ten million. This is how that compares to winning with Premium Bonds

Are Premium Bonds still a good bet?

When the prize rate is increased to 4 per cent, it will be just below that of the current easy access market leader, Shawbrook Bank, which is offering 4.35 per cent.

It estimates the changes will see an extra £30m added to the prize fund from August, with an estimated 460,000 extra prizes up for grabs.

While this is good news for Bond holders, it is likely NS&I is making this move to encourage more people to stick with NS&I – or to take out Premium Bonds – following a major drop in the number people currently hold.

Between June and July, only £460,000 worth of new Premium Bonds were taken out, compared with £315.9m between May and June.

Andrew Hagger of Moneycomms said: “I think NS&I has been forced to increase the prize pot rate again to remain competitive with the broader savings market. You can now easily get 4 per cent on easy access savings and 6 per cent for a one-year fixed rate paying a guaranteed amount of monthly interest.

“For the first time in many years savers have a wide range of excellent savings options, so NS&I has little choice but to up its game, unless it wants to get left behind.”

People are also evaluating their options following 13 consecutive base-rate rises since December 2021.

Sarah Coles of Hargreaves Lansdowne said: “The flight from easy-access accounts with banks comes down to two trends. More people are locking in a competitive fixed rate while they can – so they’re moving from easy-access to fixed accounts.

“It’s also a clear sign that as the cost of living squeezes us ever-harder, more people find they can’t cut their spending enough to make ends meet, and are eating into their savings.”

She adds that NS&I will have “one eye” on the fact inflows have slowed, more than halving between April and May.

NS&I have a net financing target set for them by the Government, currently at £7.5bn.

With more than 500 separate provider updates to savings rates seen in June this year alone, NS&I is reacting to this increased competition to both retain existing savings and gain new ones, to ensure they hit that target set for them, experts say.

Coles said: “When you consider that its fund-raising target actually increased this year, it will be keen to attract more cash in the coming months.”

Daniel Darragh of Savings Champion added: “We believe people not taking up Premium Bonds this has less to do with savers taking their money out, and more to do with an increase in competition.”

However, he still believes that Premium Bonds are a good option.

“As a well regarding national institution, with whom funds are fully backed by the Treasury, NS&I still remains a stalwart in the savings arena, and an increase in their rates can only be good news for savers.”

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