Calls for major Premium Bonds change would make 'fewer prize winners'

An expert is calling on Chancellor Rachel Reeves to remove the £50,000 cap on Premium Bonds alongside some rate changes in a bid to raise an extra £1billion for the Treasury and tackle Britain's growing debt. The move may create fewer winners in the monthly prize draw though.

Premium Bonds do not provide interest rates but rather aprize rate, where each bond is entered in a monthly draw with millions up for grabs.

This means it's cheaper for the government to borrow money from savers through Premium Bonds as the prize rate has historically underperformed compared to interest rates according to Tim Leunig, an economist at the London School of Economics.

Leunig told The Telegraph that doing away with the limit and cutting the rates on the account to 70% of the bank rate would raise £1billion for the Treasury. He said: "It's a lot of money out of nowhere. Of course, there are losers. There would be fewer prize winners. But it would be defensible."

However, other experts disagree. Maxwell Marlow, of the Adam Smith Institute think tank, said: "Premium Bonds remain very problematic when it comes to delivering both economic growth and increases in household wealth.

"It's a very low risk, low reward investment and I'd argue should not be encouraged through rule tweaks. We need investment into capital and equity, not more debt-financing for the Government."

Marlow isn't alone in these criticisms, a number of money experts like Martin Lewis often recommend people look at traditional saving or investment accounts rather than Premium Bonds due to the low chance of getting their number picked in a prize draw.

Caitlyn Eastell, spokesperson at Moneyfactscompare.co.uk, said: "While premium bonds are a fun, unconventional way to win some tax-free cash, the reality is that it is a game of chance, and the majority of savers may not even win a prize. They sometimes also rely on investors to claim these prizes, meaning there is currently over £100 million left unclaimed-more than £10 million higher compared to the end of 2024."

Premium Bonds currently holds more than £130billion. Each £1 is equivalent to a single bond number and at the start of each month, all of these numbers are entered into a prize draw.

Two savers win £1million from the draw each month, delivered by a mystery civil servant known as 'Agent Million'. The rest of the prize money is dished out to a million savers ranging from £100,000 sums to £25 winnings.

The last time the limit was increased was in June 2015 when it rose to £50,000 from £40,000. The year before it had also increased from £30,000 to £40,000.