Premium Bonds, a unique savings product offered by NS&I (National Savings and Investments), have long held a special place in the hearts of British savers. Instead of paying a fixed interest rate, Premium Bonds enter holders into a monthly prize draw, with the tantalizing possibility of winning anywhere from £25 to a life-changing £1 million. But with recent changes to the prize fund rate and winning odds, many are now asking: are Premium Bonds still worth it?
On February 26, 2026, NS&I announced a significant shift. Starting from the April 2026 draw, the Premium Bonds prize fund rate will drop from 3.6% to 3.3%. At the same time, the odds of any single £1 bond winning a prize will worsen—from 1 in 22,000 to 1 in 23,000. According to MoneySavingExpert.com (MSE), the nearest thing Premium Bonds have to an interest rate is the prize fund rate, but most people with typical luck won't ever see a return that matches it—even if they max out their £50,000 investment.
Martin Lewis, the well-known financial journalist and founder of MSE, has weighed in on the changes. On his BBC Podcast and social media, Lewis explained the mechanics behind the prize fund rate: "The Premium Bond prize fund rate is 3.6 per cent currently. Now what that means is if you were to add up every single Premium Bond in existence in the UK and you take 3.6 per cent of it that's how much they are paying in prizes in a year. Now what that doesn't mean because it doesn't work that way is if you put £100 in Premium Bonds you're going to get £3.60 because that's impossible. The smallest prize is £25. So what happens on £100 is a lot of people get nothing and a few get £25. That means the mean average is 3.6 per cent but far more important is the median average which is zero on £100 in Premium Bonds over a year."
Lewis went on to clarify that the "median is if you lined everybody up who had £100 in Premium Bonds from those who win the most to those who win the least what would the person exactly half way along win." In essence, for most people, the typical return is less than the mean average, and many will win nothing at all in a given year.
The MSE team echoed this sentiment in their latest analysis, stating: "For most savers with average luck, accounts that pay interest will now be even more likely to beat Premium Bonds. This is because savings interest is a guaranteed return – so if you get today's top easy-access rate of 4.5%, you'd get £45 in interest a year for every £1,000 saved. Though this interest rate can go up and down over time, you know exactly what you'll earn at any given point – so it still provides more certainty than Premium Bonds, where many saving the same £1,000 would win nothing."
Indeed, the top easy-access savings accounts currently offer about 4.5% interest, while the top easy-access cash ISA rate stands at 4.4%. Both provide a guaranteed return that is higher than the new Premium Bonds prize fund rate of 3.3%. For those looking for certainty and the best possible return, these traditional savings vehicles are hard to beat.
However, Premium Bonds do have some unique advantages. As Lewis and the MSE team point out, the prizes are completely tax-free. This means that for individuals who have already maxed out their £20,000 ISA allowance and earn enough interest to exceed their personal savings allowance, Premium Bonds can still be a decent choice—if they're willing to accept the random nature of the 'interest.' As the MSE analysis puts it: "Premium Bond prizes aren't taxed, which means that if you've larger savings in cash, and have maxed out your £20,000 a year ISA allowance and earn enough interest to exceed your PSA, Premium Bonds are probably a decent choice... if you can accept the random nature of the 'interest'."
Andrew Westhead, NS&I Retail Director, provided further context on the changes, stating: "This change to the Premium Bonds prize fund rate and odds reflects changes in the wider savings market, and ensures we continue to balance the interests of savers, taxpayers and the wider financial services sector. Premium Bonds continue to be the most popular UK savings account. Having recently passed £40 billion in prizes drawn, the April draw is expected to have close to six million tax-free prizes worth around £375 million."
Launched in November 1956, Premium Bonds have now been part of the UK savings landscape for 70 years. Their appeal is not just in the potential for a big win, but also in the 100% government guarantee, the ability to withdraw funds easily, and the excitement of the monthly draw. As NS&I highlighted: "Premium Bonds remain one of the nation's favourite savings products and are a flexible and fun way to save. They offer the excitement of potentially winning tax-free prizes every month, the safety and security of the 100% government guarantee, and easy access to withdrawals. Every Premium Bond has a separate and equal chance of winning a prize each month, however the more Bonds you buy, the better your chances of winning. Each month we pay out millions of prizes ranging from £25 to £1 million. In our most recent draw, there were more than 6.1 million prizes worth over £403 million."
But what about those who have significant amounts invested? One listener to Lewis's podcast, Josie, asked whether it was time to move her and her partner's £60,000 out of Premium Bonds. Lewis responded that with such a sum, they might expect returns of around 3.2% to 3.3%, but this still falls short of the returns offered by the best easy-access and fixed-rate savings accounts. He added: "So then the question is, if we factor it on typical luck, how good is 3.2 or 3.3 per cent? The answer is not very. The best easy access savings accounts on the market are paying about 4.5 per cent. The top fixes on the market are in the 4.4 to 4.5 per cent type range."
Still, for higher-rate taxpayers who have used up their cash ISA allowance, the case for Premium Bonds gets a little stronger. As Lewis explained: "If you've got a cash ISA allowance available, I'd be putting it there. Then, if you're paying tax on your savings and you've filled up your cash ISA allowance, and especially if you're higher rate taxpayers which means you're going to be losing 40 per cent off your savings interest on any that you pay tax on, at that point, Premium Bonds even on typical luck at around 3.2 3.3 per cent after tax start to look good value."
But for most people, Lewis's advice is clear: high-interest savings accounts are likely to provide better returns. And for those who crave the excitement of a big win? Lewis suggests buying a small National Lottery ticket instead: "There is a chance of winning a million, but if you really want to talk about the thrill of winning, then it's probably far more sensible and more effective for those people who don't pay tax on savings and who aren't higher rate taxpayers, to go and put their money in top savings and then take a couple of quid out and put it in the National Lottery and then you get your thrill of winning anyway but you get more return on the underlying savings."
With the prize fund rate cut and odds of winning slipping further, Premium Bonds may not be the best bet for those seeking reliable returns. But for those who value safety, flexibility, and a dash of excitement, they remain a uniquely British institution—just one with slimmer odds than before.