Premium bonds fall short as investors miss out on thousands
Premium bond holders are falling short compared to UK investors, missing out on thousands by choosing to dodge the stock market.
Brits who keep capital instead of premium bonds instead of stocks could be losing out on almost £3,800 in earnings, according to data from investment platform Lightyear.
The average premium bond holder with the typical balance of £6,000, would have earned just £908 in prize winnings between 2021 and 2025, assuming average returns and reinvesting the prize.
In contrast, investing the same amount into London’s flagship market over the same period through a stocks and shares ISA would have boosted the investment to over £10,600.
This would leave investors £3,788 better off.
Market volatility and record highs
Investors and savers have soured on the FTSE in recent years, particularly during the widespread market volatility in 2022, leading them to look for opportunities overseas or return to the safety of cash.
However, the market has delivered strong returns in recent years, with the FTSE 100 trading near its all-time high, just below 10,000 in December 2025, rising by more than a fifth over the course of the year.
It also achieved annual compound growth of 12 per cent over the past five years, while this month, the index climbed above 10,000 points for the first time since 1984.
Meanwhile, premium bonds have delivered an average rate return of just 2.8 per cent, even after the prize fund peaked at 4.65 per cent in September 2023.
Playing the lottery with wealth
Despite the low returns and no interest rates, premium bonds remain one of the UK’s most popular saving products, with over 22m holders collectively storing over £134bn, meaning roughly one in three Brits own a premium bond.
While the government push and arrival of new digital investing platforms has awoken Brits to the incentives of opening a stocks and shares ISA, the gap is stark, with only 4m Brits having one.
Among ISA products, the cash ISA also remains the most popular, with roughly 10m UK adults having one.
Lightyear’s UK chief executive, Wander Rutgers, said: “Now more than ever, Brits want their money to work harder for them. While many see premium bonds as a responsible way to store their hard-earned cash, they’re missing out on thousands by ‘playing it safe’.
“Millions of Brits are effectively opting into a lottery rather than putting their money to work. For people with long-term financial goals, that trade-off needs a serious rethink.”