NS&I premium bond odds of winning are lower than you think but still viable

National Savings and Investments (NS&I) is the largest premium bond provider in the UK, offering a unique savings product. Instead of earning interest on deposits, customer receive prizes which are paid out based on a lottery. The average prize rate allocated to customers is paid at the same rate as interest on savings accounts, so statistically speaking it is a viable option.

Based on September's draw £405 million was paid out based on an annual prize rate of 4.65%.

It's important to note here, prizes are paid in varying amounts ranging from the lowest prize of £25 to the highest of £1,000,000. The change of winning is however very low.  

NS&I distributes their prizes 10% to high prizes (£10K to £1M); 10% to medium prizes (£500 to £5,000) and 80% to low prizes (£25 to £100); a lot of people win a little bit and a very lucky people win a lot. Producing an average prize amount (September 2023) of £73.33.

Link to NS&I on how they explain how the prizes work.

How do we calculate the odds?

To determine the odds of winning, you must divide the average prize rate by the average prize value.

An average prize rate of 4.65% (September 2023) divided by average prize of £73.33 equates to a 0.0634% chance of winning. Meaning if you held a £1,000 worth of premium bonds over a year you would have a 63.41% chance of winning throughout the year. For convenience I used annual rates, prizes are drawn monthly.

If you held £10K throughout the year, you would on average win 6.3409 times. 6.3409 x £73.33 = £464.98 which aligns with the annual prize rate 4.65% NS&I disclose.  

Is NS&I still a good option?

The more premium bonds you purchase the more odds you have, but the relationship is similar to that of having more funds saved away in your bank account.  

The decision of whether you find NS&I suitable for you is whether you are comfortable with investing/saving based on arithmetic. You have a tiny chance of winning a life changing amount and a very high change of winning nothing at all.