Premium Bond investors unlucky in base rate cuts

by Gill Montia

Story link: Premium Bond investors unlucky in base rate cuts

Savers who have switched their nest-eggs into Premium Bonds because they would prefer to take a gamble, rather than sit with falling interest rates, will be disappointed to learn that their chances of winning a prize lessen with each cut in the base rate.

A person investing £1,000 in bonds at the beginning of last year had a 43% chance of a win.

Aggressive cuts in the base rate have since reduced the chance of a return to 28% and the odds will deteriorate further if rates are cut again today because the size of the prize fund is determined by the base rate.

Premium Bond prizes range from £50 to £1 million and in January of last year, 451 investors won prizes of over £1,000. However, the number tumbled to just 26 last month.

Around 23 million Britons are Premium Bond holders and numbers have been rising because the Government-backed bonds have been seen as a safe investment during the credit crisis.

The scheme, which is run by National Savings & Investments, is now being described by savings experts as worthless, in terms of returns for investors.