An estimated 22 million people hold Premium Bonds. That's around a third of the country. But why do they remain so popular?
With returns on the Bonds being cut by roughly 13 per cent from next month, the chances of actually winning anything are shrinking fast. In fact the odds of winning a prize will fall from 24,000 to 1 to 26,000 to 1. But there's no guarantee that Bondholders will actually win anything, ever, as the prizes are drawn randomly.
Let's face it, the prize fund interest rate quoted by National Savings & Investment – the Government department that runs the Bonds – is not really relevant. It's falling from 1.5 per cent to 1.3 per cent from 1 August, but for millions of people it's zero.
Meanwhile keeping cash in Premium Bonds means losing money in real terms as inflation takes its toll. Yes, the thought of winning a million is nice, but don't let that blind you to the fact you're losing money every month.