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Choosing Between NS&I Premium Bonds and Cash ISAs in 2024: A Saver’s Guide

Are NS&I Premium Bonds a good option in 2024? Or should you consider a Cash ISA for your savings? Let’s explore both. 

 

The Appeal of Premium Bonds 

Premium bonds are a favourite among UK savers, with over 24 million holders. The main attraction is the chance to win substantial cash prizes. 

 

What Are Your Chances? 

While the idea of winning £1 million is exciting, the odds are quite low. In May, there were 123.6 billion bonds, resulting in a 1 in 2.47 billion chance of winning a million. As more people buy bonds, these odds decrease even further. 

 

The Effect of Inflation 

Premium bonds don’t pay interest. If you don’t win, your money loses value due to inflation. For instance, £1,000 invested in 1995 would need to grow to £1,987 today to match inflation. Without winning, your bonds remain at £1,000, effectively losing value. 

 

Understanding Prize Rates 

The prize rate for premium bonds is currently 4.40%. If the prize money were evenly distributed, each bondholder would see a 4.40% return. However, this isn’t a guaranteed rate. With £1,000 in bonds, you could end up with no wins in a year. 

 

Tax-Free Advantage 

Premium bond prizes are tax-free, which is a significant draw. But Cash ISAs offer the same tax benefit along with regular interest payments. 

 

Cash ISAs: A Steady Option 

Cash ISAs allow you to save up to £20,000 per tax year without paying tax on the interest earned. Right now, competitive Cash ISA rates are over 4.50%, whether it’s a fixed or easy-access rate, providing a more predictable return. 

 

Comparing NS&I and Other Providers 

NS&I’s variable-rate Cash ISA offers only 3%. With expected lower inflation rates, other Cash ISAs can provide tax-free returns that outpace inflation. 

 

Finding the Best Rates 

To get the best Cash ISA rates, check out online banks and building societies. These often have the most competitive offers. Platforms that aggregate rates from smaller banks can also help you find the best deals without much effort. 

 

Making a Decision 

Some people will continue to choose premium bonds, hoping for a big win. Others will prefer the reliable returns of a Cash ISA. 

Ultimately, the choice depends on what works best for your financial situation and goals. 

 

 

Founded in 2017, Fintuity has fast become one of the only digital Independent Financial Advisers (IFA) in the United Kingdom.  Fintuity offers a wide range of financial advisory services including pensions, protection, investments and mortgage advice. The key difference is that as an exclusively digital service, we can offer significant savings and a service that is direct to you and on demand. 

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