- More than £2bn of Premium Bonds are purchased typically each month
- Research shows that buying at the start of the month is not a good idea
- Premium Bonds don't pay interest so you could be missing out if you go early
By Ed Magnus For Thisismoney.co.uk
Updated:
Our love affair with Premium Bonds is strong. They are the nation's most popular savings product with21million people holding a collective 121 billion eligible Bond numbers between them.
In the 2021/22 financial year, NS&I reported £24.7billion gross inflows from Premium Bond customers.
That equates to more than £2billion of Premium Bonds being purchased each month.
However, those putting money into Premium Bonds should think tactically about when they do so - or potentially face a huge penalty.
Trap: Early Premium Bond investors could be missing out on a considerable amount of lost interest by buying early - especially those who max-out.
People can buy Premium Bonds on any day of the month to be eligible for the next possible draw. This is not the following month, but the one after.
For example, people can buy Premium Bonds any time before 30 April, in order to be in June's draw.
This means that those who purchased Premium Bonds on 1 April, would still only be in June's draw.
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This means that early investors could be missing out on a considerable amount of lost interest in the meantime - especially those who max-out.
Premium Bonds don't pay interest, unlike easy-access savings accounts - the best of which is now paying 3.65 per cent.
How long does it take to buy Premium Bonds?
Deposits into Premium Bonds when made by bank transfer or standing order will typically take two to three working days to reach the account but it will show on your record for the day you deposited.
Debit card payments are generally within 2-3 hours.
Customers should receive an email within a few minutes of making the deposit, and the transaction history will show within 2-3 hours in a customer's online account.
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Putting £50,000 into Premium Bonds on 1 April, would essentially render it as dead money for a month.
If someone instead waits until the end of the month and in the meantime, sticks the cash in one of the best easy-access accounts, they could earn more than £100 in interest.
Cutting it too fine runs the risk of missing the next month's prize draw altogether, so it's worth leaving a few days cushion just to be on the safe side.
We asked experts at the website, Savings Champion, to crunch the numbers of how much Premium Bond depositors are missing out on by buying bonds at the start, rather than the end of each month.
Assuming they deposited the money into an easy-access account paying 3.55 per cent, £50,000 for 25 days will earn £121.57 in interest, while £10,000 for 25 days will earn £24.32.
Savings Champion calculated it based on 25 days to allow for a little wiggle room to get the money transferred.
| Premium Bonds deposit | Savings rate | Number of days | Interest earned |
|---|---|---|---|
| £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 each month ranging from £25 to £1million. The average prize fund rate is 3.3 per cent.
This is not an interest rate but instead refers to the average return Premium Bond holders can expect to make from prizes.
Of course, in reality they can end up doing better or worse than the prize fund rate depending on how lucky or unlucky they are.
It was revealed last week, that the luckiest ever Premium Bond winner has taken home a total of £1,019,850, across 288 prizes, since they bought their first bond in May 2004.
NS&I pays out around £330million of prizes ranging from £25 to £1million every month to Bond holders.
The odds of winning a monthly prize with £1 bond is currently fixed at 24,000 to 1.
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