- Average account value among the 14.3 million Premium Bond holders who have never won a prize is just £106.79, an FOI obtained by AJ Bell can reveal*
- The data also shows nearly 14 million people hold small accounts of less than £100, equating to 60% of all Premium Bond holders
- There is over £100 million in Premium Bonds prizes sat unclaimed over a period spanning decades, according to recent reports (source: BBC)
- With two-thirds (63%) of Premium Bond holders never winning a prize or receiving any kind of return on their bonds, are Premium Bonds worth it?
- Parents or grandparents thinking about purchasing Premium Bonds for children should consider opening a Junior ISA and investing some of that money instead
- A regular monthly investment of just £25 into the MSCI World index of global companies 18 years ago would be worth £17,700 today
- Three steps to consider when opening a Junior ISA for children
Laura Suter, director of personal finance at AJ Bell, comments:
“Premium Bonds have long been perceived by parents and grandparents as a safe store of a few quid, often gifted when a child is born or for birthdays in the hope that they could be one of the lucky winners of one of the top prizes. Unfortunately, unless they are saving large amounts they’re unlikely ever to see that dream become a reality, and may not earn any return whatsoever.
“Almost 14 million people have a balance of less than £100 in Premium Bonds, the data disclosed to AJ Bell shows. But tiny accounts stand only a slender chance of winning and will account for a huge proportion of the accounts that have never won.
“To put things in context, those 13.7 million people with a balance under £100 represent over 60% of all holders, but only 0.1% of all the money held in Premium Bonds. In contrast, just 5% of holders have the maximum £50,000 balance, but they account for 50% of the total value of all Premium Bonds in circulation. Put simply, if you’re one of the millions of people with a small amount of money in Premium Bonds, the odds are stacked against you.
“Often these accounts are given to children as a gift from parents or grandparents. While there’s no harm in them, there may be better ways to save or invest the money for children. Premium Bonds currently offer a prize fund rate of 3.6%. That rate is eclipsed by many other savings accounts on the market and it masks the fact many won’t actually ever win anything. A previous FOI submitted by AJ Bell revealed that just under two-thirds, or over 14 million account holders have never won anything on their Premium Bonds.”
Small accounts
“The average holding among those who’ve never won a prize is just £106.79 – money that will not have seen any return whatsoever during the time it was sat in the accounts, despite the headline ‘rate’.
“In some cases those people who do win fail to collect their prize. There is over £100 million worth of prize money that has never even been claimed, according to recent reports by the BBC. Many of the winners this lingering prize money belongs to will be Premium Bond holders who hold low value accounts that will have been gathering dust for decades since they were opened when they were children. But there will also be many people with higher balances who have also let their Premium Bonds money drift over the years.
“This will be down to a number of factors, but will often be because many people have simply forgotten that they have any money in Premium Bonds, or that they can’t remember the details for their account and don’t fancy spending their time digging around or chasing login details. Parents and grandparents will often hold onto the records and documents relating to Premium Bonds bought for children, but it’s easy for that to be lost or forgotten about before the child is old enough to manage the account themselves.”
Alternatives to Premium Bonds for children
“Rather than laying £100 or less to rest in Premium Bonds, it might be worth considering opening a Junior ISA for the child and investing the money instead. A parent who had put just £25 a month into the MSCI World index of global companies 18 years ago when their child was born would be handing them £17,700 on their 18th birthday. In other words, that translates to a meaty annualised return of 10.1%**.
“Of course, many parents and grandparents may feel uncomfortable at the idea of investing money for their child or grandchild, but history shows that over the long term investing, even in something low maintenance such as a global tracker fund, can outpace cash and inflation. Analysis by AJ Bell shows that investors in the IA Global sector since 1999 would have made £49,211 more than the average Cash ISA return, based on a £1,000 annual investment – hardly something to be sniffed at.
“That’s not to say that everyone should ditch cash and bonds, as safe havens have a key role to play in people’s finances. Although given that savings and investments for children will normally be held for them until they reach adulthood, there’s less reason for them to hold cash savings. You can also buy so-called ‘all in one’ funds that spread your money between different countries’ stock markets and across various asset classes, with an option of having more or less in stock markets versus bonds, gold and cash, depending on your risk appetite.
“Ultimately, you need to feel comfortable investing on behalf of a child before making the leap, so it’s important to understand what you’re investing in before doing so. Here are three steps that could help those parents and grandparents who don’t know where to start.”
Three steps to opening an investment Junior ISA for children
Step 1: Pick an account
“When you’re starting out it might feel a bit confusing picking the right account. A Junior ISA is a good option for many: you can pay in up to £9,000 a year per child, the money is ring-fenced in the child’s name, and it’s locked up until they turn 18.
“However, if you want a bit more flexibility or think you might want access to the money before the child’s 18th birthday, you could just save the money in your own ISA. It means you’ll have to use up some of your own £20,000 ISA allowance, but that is only an issue if you think you’ll max out that limit for your own savings. The money isn’t ring-fenced and you can access it at any time – which is both a pro and a con. If you’re worried you might dip into the money it may be better in a Junior ISA, but if you want the flexibility to access it if you need to, it could be a good option.
“Your longer-term option is a pension for your child: a Junior SIPP. You can save up to £2,880 in this account, which will get topped up with tax relief from the government to £3,600. But it’s a very long-term option, as your child won’t be able to access the money until they reach retirement age. However, if you made just one contribution of £2,880 at birth and it grew by 5% a year, your child would have a pot worth £58,000 by the age of 57 – showing the magic of investment growth and compounding.”
Step 2: Pick a way to invest
“You can choose whether to make a lump sum investment for the child or spread the money throughout the year. You can set up monthly investing for the children in your life and contribute a small amount each month.
“Many investment platforms will allow you to start regular investing from as little as £25 a month. You can always pause it if you need to skip a month, but it means you don’t have to actively log in and invest money every month.
“With a Junior ISA you could put away up to £9,000 a year, and any parent or grandparent fortunate enough to be able to put that amount away for their child each year would be handing them a £266,000 present on their 18th birthday, assuming 5% investment returns a year. For many that will be a pipe dream, but even squirreling away a little money each year will be enough to help a child out when they’re 18.”
Step 3: Pick investments
“When it comes to picking investments, the first question is whether you want to pick the stocks yourself or outsource that task to a fund. If you opt for funds, you’ll want to weigh up using an active fund manager or a passive fund. There’s no right answer to this, it comes down to preference. Put simply, a passive investment approach will cost you less but will only track the performance of the market – never outperform it. With active management you’re paying more to have a fund manager pick stocks for you, but the hope is that this will generate a higher return than the index.
“There’s no need to sit entirely in one camp, you could mix the two approaches. For example, having a broader UK stock market tracker and then using an active fund for a more specialist area. Another option is to pick a multi-asset or ‘all-in-one’ fund, which can be active or passive and invests in a mixture of different assets, meaning you only need invest in one fund that is already diversified, rather than picking lots of different investments.
“When investing for your children it’s important to think about the timeframe. If they are young, you could have up to 18 years until they will access the money. This makes for a decent investment horizon and means you could potentially take more risk with the money, as you have time to ride out the ups and downs of the market. Conversely, if your child is closer to 18 you might want to take less risk or even stick to cash.”
*Source: FOI from NS&I obtained by AJ Bell. Data accurate as of 24 April 2025. The number of current holders who have not won a prize is based on data since February 1994 and includes new holders who were not eligible as their Bonds were not beyond one month purchased.
**Source: FE. Based on a monthly £25 investment into the MSCI World Index from 1 August 2027 to market close on 31 July 2025. Does not take into account fund or platform fees.
