Premium Bond Income

[Protagoras]

If you don’t like no-risk investment, then I can understand why it might put you off.

But really is there such a thing as 'risk free' investment?

Inflation is there as an invisible tax on holding cash, so even this carries risk (almost certainty) of loss of purchasing power over time.

[WTFH]

Interesting. I can see the value.
But why are the payouts per subscriber random? Really puts me off.

The “payouts”, “winnings”, or “interest” are done on a monthly draw. There is no guarantee you will “win” anything, but you could “win” up to £1million each month. So, it’s a bit like playing the lottery, except if you don’t “win” you haven’t lost your money, equally you could “win” multiple times in one month, and when you have won, that bond is still active for future draws.
It’s not a “subscriber”, you’re investing in Premium Bonds, each bond costs £1 (minimum initial investment is £25). If you’ve got £50,000 invested, then you have 50,000 bonds, each of which might win something. https://www.nsandi.com/get-to-know-u...ize-allocation
Think of it like putting it into a bank with variable interest rates. If you’re used to investing in stocks & shares etc, or anything with any level of risk, then you know your investment could go up or down, and you may end up paying commission/tax on the return on the investment. With Premium Bonds, there’s no commission or tax on your return, and you can get some or all your money out at any time.
If you don’t like no-risk investment, then I can understand why it might put you off.

[Dorkeaux]

1. Your investment is risk-free. If you put in £50k, you still have your £50k to take out, no matter what.
2. You can add or take out money from it at any time, up to the £50k investment limit.
3. Any interest earned is tax-free.
4. The average return (as of April 2026) is 3.3%, and is paid monthly, not yearly or every 5 years, or whatever.
5. You don’t have to study markets or scooter graphs deciding/guessing where to move your money to.

So, if you’re a contractor wanting to have a warchest, it’s a very sensible option. Might not be the most exciting, might not have much risk associated with it, but that’s part of what makes it a very sensible place to stick up to £50k and leave it there.

Interesting. I can see the value.
But why are the payouts per subscriber random? Really puts me off.

[WTFH]

I honestly don't get Premium Bonds. It's like some kind of lottery?
Do I understand correctly that the average return is around what you and FatJock quote?
Is it the randomness that is the attraction?

1. Your investment is risk-free. If you put in £50k, you still have your £50k to take out, no matter what.
2. You can add or take out money from it at any time, up to the £50k investment limit.
3. Any interest earned is tax-free.
4. The average return (as of April 2026) is 3.3%, and is paid monthly, not yearly or every 5 years, or whatever.
5. You don’t have to study markets or scooter graphs deciding/guessing where to move your money to.

So, if you’re a contractor wanting to have a warchest, it’s a very sensible option. Might not be the most exciting, might not have much risk associated with it, but that’s part of what makes it a very sensible place to stick up to £50k and leave it there.

[Protagoras]

Isn't inflation around 3% right now? How is 4.6% well below?

The government's 3% CPI measure of inflation is not the rate of inflation I experience, which is currently running at over 9%. Drivers include; Council Tax up 8.5%, water 8.7%. (n.b. Council Tax is not included in CPI).

If you can put it away for a year, there are bank accounts that return 4.65% at the moment.
That would meet your requirement.

Yes, there are some decent rates around, including for ISAs. My expectation is for interest rates to rise, and for this rise to be ineffective at reducing inflation.

I've been doing OK with my cack-handed investment "strategy" buying ETFs and likely looking stocks. The usual mix of shocking dogs and rockets.
I'm moving more towards ETFs to give my heart a rest, but over time the market seems to do better than gilts, banks, gold, annuities etc.

I've got a small number of stocks but generally avoid funds, on a self-managed basis. Despite the current volatility I'm up on 3 months ago but that could all change!

I honestly don't get Premium Bonds. It's like some kind of lottery?
Do I understand correctly that the average return is around what you and FatJock quote?
Is it the randomness that is the attraction?

I think the return is about the level that FJ and I report. But for it being tax free, it would make no sense. But it's attractive for those who would otherwise pay higher rate tax on the income. Plus there's the risk that one might win a larger amount.
It was much better in the days when there was only one £1m prize and more smaller prizes in my experience. I've dipped in and out of PBs in the last 30 years or so. For example, when interest rates were very low I didn't win enough to justify the holdings.

[NotAllThere]

I just put a few hundred quid into the stock market every month. The volatility smooths out the longer you hold them. Occasionally I sell the really poorly performing shares and try something else.

In the past 10 years, my returns so far have been equivalent to 7%. I did make some very lucky choices, and no, I don't have any inside knowledge about what the Whitehouse is planning.

[Dorkeaux]

Well, that's the last premium bond income for this tax year and the return works out at 2.7%, which I think is about average. But since this income would for me be taxed at 42%, I'd need to have the money returning 4.6% if saved elsewhere to earn more from it.

Of course even 4.6% return is well below inflation. I'm reluctant to invest in stocks given volatility and have enough exposure for now.

Not many good options unless I can benefit from advanced notice of tomorrow's speech by some 'great leader' or other.

Always a problem.
Get get a better return on savings than inflation eats away, but keep volatilty low.
Isn't inflation around 3% right now? How is 4.6% well below?

If you can put it away for a year, there are bank accounts that return 4.65% at the moment.
That would meet your requirement.

I've been doing OK with my cack-handed investment "strategy" buying ETFs and likely looking stocks.
The usual mix of shocking dogs and rockets.
I'm moving more towards ETFs to give my heart a rest, but over time the market seems to do better than gilts, banks, gold, annuities etc.

I honestly don't get Premium Bonds. It's like some kind of lottery?
Do I understand correctly that the average return is around what you and FatJock quote?
Is it the randomness that is the attraction?

[tazdevil]

Not many good options unless I can benefit from advanced notice of tomorrow's speech by some 'great leader' or other.

Yes, when's the great dictator getting done for insider trading?

[sadkingbilly]

mine was 0%

[fatJock]

Mine was 4%.

[Protagoras]

Well, that's the last premium bond income for this tax year and the return works out at 2.7%, which I think is about average. But since this income would for me be taxed at 42%, I'd need to have the money returning 4.6% if saved elsewhere to earn more from it.

Of course even 4.6% return is well below inflation. I'm reluctant to invest in stocks given volatility and have enough exposure for now.

Not many good options unless I can benefit from advanced notice of tomorrow's speech by some 'great leader' or other.