From 1 May, NS&I cut the Premium Bonds effective prize rate from 1.25% to 1.15%. Plus, while the chance of winning any prize remained at one-in-30,000, the number of high value prizes in each month’s draw was reduced.
Family Building Society's Windfall Bond operates in a similar way to traditional Premium Bonds as all bond holders are entered into a monthly draw to win cash prizes.
The key difference is that the Windfall Bond also guarantees a return for savers, paying interest on your holdings at the level of the Bank of England base rate – currently 0.25%. This is paid annually on 1 August.
However, there are some drawbacks. Each Windfall Bond costs £10,000, making it much more expensive than a single Premium Bond - which costs £1, subject to a minimum purchase of £100.
The NS&I top prize is also significantly higher, with two top prizes of £1 million each month compared to a single £50,000 prize on offer with Family Building Society.
Each Windfall draw also includes 10 prizes of £1,000 and two of £10,000 whereas Premium Bonds offer a larger number of smaller prizes – over two million – each month, starting at £25. This means a Windfall Bond offers an effective rate of 1.21% (0.96% prize fund plus 0.25% interest). This compares with NS&I’s 1.15%.
There are, however, no limits on the amount of Windfall Bonds you can hold, whereas with Premium Bonds you’re restricted to £50,000.
Family Building Society offers protection up to £85,000 under the Financial Services Compensation Scheme (FSCS). With NS&I your deposits are fully secure as it is fully backed by HM Treasury.
What are the odds of winning?
If you hold a single £10,000 Windfall Bond you will have 12 chances to win each year, plus a guaranteed £25 in interest.
With 13 prizes on offer in each draw this means there is a one in 64 chance of scooping a prize worth £1,000 or more with the Windfall Bond.
By comparison, someone with the equivalent £10,000 in Premium Bonds has a one in 404 chance of scooping a £1,000 prize or greater over a year. Although, of course you can theoretically bag £50,000 with the Family Building Society and £1 million with Premium Bonds, even if the chances are miniscule.
With £10,000 saved in Premium Bonds you also have a one in three chance of winning £25 in each draw, meaning a person with average luck would be expected to earn £100 over the course of a year.
The choice you make depends on whether you want to earn some guaranteed interest and have a better chance at a £1,000 prize, or you would prefer to take a shot at winning a £1 million Premium Bonds jackpot.
The table below details a quick comparison of the two products.
| NS&I Premium Bonds | Family Building Society Windfall Bond | |
|---|---|---|
| Cost per bond | £1 per bond (minimum £100), up to £50,000 limit | £10,000, with no limit |
| Top prize | Two prizes of £1 million | One prize of £50,000 |
| Odds of winning £1,000 over a year (based on £10,000 holding) | One in 404 (based on estimates for August 2017 draw) | One in 64 |
| Interest earned | None | Base rate, currently 0.25%, paid annually on 1 August |
Source: Moneywise, May 2017.
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