Premium Bonds savers issued £3,000 warning (Image: Getty)
Premium Bonds savers may be missing out on thousands of pounds in returns by avoiding other lucrative savings tools. New research has found that the average Premium Bonds holder could be £3,800 worse off than those investing in the FTSE 100 over five years.
The new analysis shows that Premium Bonds have delivered an effective return of 2.85% since 2021, compared with 12% annual compound growth in the FTSE 100. Despite the recent 11% annual growth in the number of Stocks and Shares ISA holders, it would still take 16 years for Stocks and Shares ISA participation to reach the current level of Premium Bonds ownership.
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Premium Bonds holder could be worse off compared to those investing in the FTSE100 (Image: Getty Images)
Investment platform Lightyear found that an average Premium Bond holder with £6,000 – the typical balance – would have earned just £908 in prize winnings between the start of 2021 and 2025, assuming average returns and that they reinvested their prizes.
By contrast, investing the same amount in the FTSE100 over the same period through a Stocks and Shares ISA would have grown the investment to £10,696.80, leaving investors £3,788 better off.
The FTSE 100 delivered strong performance in 2021, 2024, and 2025, resulting in compound annual growth of 12% over five years.
Meanwhile, Premium Bonds delivered an effective average return of just 2.85% over five years, even after the prize fund rate peaked at 4.65% in September 2023.
Premium Bonds have delivered an effective return of 2.85% since 2021 (Image: Getty Images)
Premium Bonds remain one of the UK’s most popular savings products, with more than 22 million holders collectively storing over £134billion — equivalent to roughly one in three Brits owning a Premium Bond.
While momentum is building behind Stocks and Shares ISAs, the gap remains stark. The latest HMRC figures show just over four million people are currently subscribed to a Stocks and Shares ISA.
Lightyear’s UK CEO, Wander Rutgers, said: “Now more than ever, Brits want their money to work harder for them.
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“While many see Premium Bonds as a responsible way to store their hard-earned cash, they’re missing out on thousands by playing it safe.”
“With more than £134 billion sitting in Premium Bonds, millions of Brits are effectively opting into a lottery rather than putting their money to work. For people with long-term financial goals, that trade-off needs a serious rethink.”
