New data reveals that first-time Premium Bond winners are now waiting over three years on average to receive a prize, highlighting a significant opportunity cost for savers whose money earns no interest while it sits in the government-backed draw.
The figures, obtained by wealth manager Quilter through a Freedom of Information request to National Savings and Investments (NS&I), show the average wait for a first prize in 2025 was 3.1 years. Furthermore, 29% of those inaugural winners had been holding their bonds for more than two years before seeing any return. During that period, the cash involved misses out on the guaranteed interest offered by traditional savings accounts, while inflation can steadily erode its purchasing power.
The scale of investment needed to win
The data underscores that winning is heavily influenced by the amount invested. The average holding for savers who won at least one prize in 2025 was £39,500, and even those who won the smallest £25 prize that year held an average of £39,817. Analysis of the last five years shows that 94% of the monthly £1 million jackpot winners held over £10,000, with 75% holding more than £25,000. From April, the odds of any single £1 bond number winning a prize will lengthen from 22,000 to 1 to 23,000 to 1.
NS&I states that someone with “average luck” should see their money grow by just 3.3% each year, a figure that is neither guaranteed nor competitive with the best easy-access savings rates currently available. This headline “prize fund rate” is itself set to decrease from 3.60% to 3.30% from April, following a series of reductions.
The enduring appeal: tax-free and risk-free
Despite the long waits and uncertain returns, Premium Bonds retain two powerful advantages that explain their enduring popularity, with over £106 million in prizes currently unclaimed.
First, all winnings are entirely tax-free. This makes them a compelling option for higher-rate taxpayers who have exhausted their £20,000 annual ISA allowance and their £500 Personal Savings Allowance. Once those shelters are full, interest from a standard savings account becomes taxable, whereas a Premium Bond prize of any size incurs no tax liability.
Second, money held with NS&I is considered 100% secure. While deposits with UK banks are protected up to £120,000 per person under the Financial Services Compensation Scheme, NS&I is an executive agency of the Treasury. This means savings are backed by a government guarantee, effectively rendering them risk-free from institutional collapse.
The product also carries a unique historical and psychological appeal. Introduced in 1956 by Chancellor Harold Macmillan to encourage saving, the first draw was conducted in June 1957 by a machine named ERNIE (Electronic Random Number Indicator Equipment). The thrill of the monthly draw, which now includes two £1 million jackpots, continues to attract millions.
Weighing the odds against guaranteed returns
Financial experts caution that the product’s structure is not suitable for all. Ian Futcher, a financial adviser at Quilter, which obtained the data, said the bonds “help to underscore the scale of the cash savings problem the UK has,” with people often parking “an inordinate amount of money” in them when alternatives may be better.
The core drawback is the lack of a guaranteed return. Laura Suter, personal finance expert at AJ Bell, notes that the published prize fund rate is merely an average and does not translate to an individual’s likely winnings. Martin Lewis of MoneySavingExpert has advised that only those with substantial holdings are likely to see a return close to that rate, assuming average luck, and that for most, the returns are unlikely to outpace inflation.
This inflationary erosion is a key risk. If inflation is higher than any interest or prize return earned, the real value of the savings falls. In a climate where top easy-access savings accounts offer guaranteed rates above the Premium Bonds prize fund rate, the opportunity cost of waiting years for a first prize becomes significant.
Ultimately, Premium Bonds suit a specific saver: one who has already maximised their tax-free ISA allowances, values absolute capital security above all else, has a sufficiently large holding to statistically improve their chances, and can accept the possibility of earning nothing for years on end. For those with smaller sums to save, or who require predictable returns, a traditional savings account or cash ISA is almost always the more reliable choice.
