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Invested my £50,000 Premium Bond funds elsewhere – check out my new financial strategy

With NS&I reducing its interest rates once more, should you consider moving your investments to alternative options?

Diverted £50,000 Premium Bond investment to alternative destinations
Diverted £50,000 Premium Bond investment to alternative destinations

Invested my £50,000 Premium Bond funds elsewhere – check out my new financial strategy

In the realm of savings, UK savers have long been drawn to National Savings & Investments (NS&I) Premium Bonds due to their unique prize-based system. However, a recent announcement by NS&I has seen a cut to the prize rate for Premium Bonds, dropping to 3.6% from August 2022, down from the current 3.8%. This change has sparked a debate about the effectiveness of Premium Bonds compared to high-yield savings accounts.

Premium Bonds are a government-backed product where returns come from a monthly prize draw rather than fixed interest. The prize rate represents the return someone who is averagely lucky can expect to get from Premium Bonds. For instance, an individual named Ruth Jackson-Kirby, who had a maximum of £50,000 in Premium Bonds for the past 12 months, managed to secure a return of just 2.1%.

On the other hand, high-yield instant access savings accounts currently offer significantly higher and guaranteed interest rates. As of early July 2025, the highest instant access savings accounts offer around 4.75% to 5.00% APY, which is notably higher than the effective yield of Premium Bonds (~3.9%).

Some savings accounts like Atom Bank’s may reduce interest if you withdraw funds within the month, so they are best for money you do not plan to move frequently. For UK savers looking for instant access and a comparable or higher yield than Premium Bonds, easy-access cash ISAs like Trading 212 at 4.98% are attractive options.

In the US, accounts like Varo Money (5.00%) and EverBank (4.30%) are current leaders in high-yield instant access savings accounts. For those moving from Premium Bonds to investments, Victoria Hasler at Hargreaves Lansdown suggests two lower-risk investment options: the Troy Trojan fund and the Ninety One Diversified Income fund. The Ninety One Diversified Income fund yields 4.99% and is designed to cushion investors when markets fall.

While Premium Bonds offer the chance of a tax-free prize and capital security, they are less predictable in terms of returns. Sarah Coles, head of personal finance at investment platform Hargreaves Lansdown, states that the current interest rate cut was inevitable due to the lower rewarding territory. Charlene Young, senior pensions and savings expert at AJ Bell, states that the chance of winning any of the top prizes remains minuscule.

In conclusion, if your priority is guaranteed and steady interest with instant access, high-yield savings accounts offering around 4.5% to 5.0% APY currently outpace Premium Bonds’ average returns. However, Premium Bonds offer the chance of a tax-free prize and capital security, making them worth considering for risk-tolerant savers in the UK who prefer a gamble over predictable interest. It is essential to consider one's risk tolerance and financial goals when deciding between these two saving options.

  1. Given the recent drop in the prize rate for National Savings & Investments (NS&I) Premium Bonds, some savers are contemplating high-yield savings accounts as an alternative, which currently offer higher and guaranteed interest rates.
  2. In comparison to Premium Bonds, high-yield savings accounts like Atom Bank’s and easy-access cash ISAs such as Trading 212 provide returns that are notably higher and offer instant access to funds.
  3. For UK savers seeking investment options after Premium Bonds, Victoria Hasler at Hargreeves Lansdown recommends the Troy Trojan fund and the Ninety One Diversified Income fund, both of which yield considerably higher rates than Premium Bonds.
  4. Despite the allure of a tax-free prize and capital security offered by Premium Bonds, they are less predictable in terms of returns and the chance of winning any top prizes remains minimal.
  5. Therefore, when deciding between Premium Bonds and high-yield savings accounts, savers should carefully consider their risk tolerance and financial goals, as the latter offers guaranteed and steady interest with instant access.

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