My win on Premium Bonds made me think about interest rates

Most people I know have Premium Bonds, or at least have thought about them. Family, friends, colleagues, acquaintances – while it’s not a hot topic, it’s certainly come up once or twice in conversation. I was admittedly more reticent about the idea – I mean, what are the chances of winning? 24,000 to one per £1 Bond number, if we’re getting technical – but I couldn’t help but feel purchasing Premium Bonds is equivalent to blowing on lucky dice before rolling, or picking up a penny on the pavement.

Nevertheless, writing about key financial issues and topics does lead a person down a specific path, and about a year ago I decided to bite the bullet with a small purchase.

I convinced myself it was a sensible plan of action. After all, my money would be 100 percent secure. At the time, interest rates were abominable, and the cash was out of sight and out of mind.

That was, until, one day I received an email totally out of the blue, telling me I had won a Premium Bonds prize.

At first, I thought it was a scam. Call it hyper-vigilance, but I knew people who had held Premium Bonds for decades on end – even longer than my current life span – without a win, so what were the chances I would strike it lucky in less than a year?

But, of course, I also knew there had been a draw the previous day, and checking the email address for its legitimacy, I realised I was perhaps luckier than I had given myself credit for.

My small win of £25 certainly wasn’t going to clear my mortgage or cover a dream holiday, as I’m sure goes through the heads of the two millionaires who are created each month. However, other than a tiny bit of extra money in my back pocket, it got me thinking more about Premium Bonds and their place in the savings market.

My first thought was that it is incredibly easy for savers to find out whether they have won the prize – whether that be a small sum like me, or something more substantial. If my chat with the ever-anonymous Agent Million hadn’t worked in teaching me about the prize winning process, I was certainly learning a thing or two now.

I decided to set up the NS&I app on my phone, and it really just involves a simple click of a button to find out whether you have won a prize in the most recent draw, or indeed the six previous draws before it.

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Others will chose to type their Bond number into the prize checker on the NS&I website. I’m less of a fan, as truth be told, I would have to either remember the number or look out the paperwork from when I made my first purchase. But this can also be a speedy way to find out about a win.

Fans of the technological age can now also ask their Amazon Alexa to provide them with the details of any win, as long as they install the NS&I prize checker function.

But then, there’s the prize rate fund: 3.3 percent to be exact, which is solid and undoubtedly welcome amongst savers. However, when compared to other offers currently available, the cracks begin to show.

The Bank of England base rate decision is looming – and that can certainly have an impact for our savings, as the last ten consecutive rate rises have shown.

Sure, it’s taking more time for banks to pass down the benefits to customers, but they are undoubtedly coming, and are likely to improve the rewards for cash saving once more after years in the doldrums.

Things get more complicated when we consider inflation, which is way above the Bank of England target, but seems to be easing, slowly but surely.

Will NS&I be able to keep pace with high inflation and high interest rates? The Government-backed savings institution held out for a long time when banks were slashing rates amid the height of the pandemic. What about the opposite direction of travel?

To me, it seems like a savings balancing act. I, and millions of others, am faced with a straightforward question.

Do we leave our savings in Premium Bonds, with the hope of a £1million win some day? Or is it more wise to take advantage of rising interest rates in the present?

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If the last three years have taught us nothing else, it is that nothing lasts forever – not even good interest rates, but thankfully, not high inflation either.

Inflation is already predicted to drop by the end of the year, and it’s likely interest rates will follow suit. Just like Premium Bonds, where you put your money and what happens in the future is all a game of chance.

So, I’m going to continue to split my money. I know the benefits of a cash savings account, but I’ve been brought around to the optimism of a Premium Bonds win – and it would be hard to let that go.

After all, who doesn’t think about a little bit of luck every once in a while?

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