Premium Bonds odds are stacked against you

**Dan Coatsworth** (0:09)
Hi, welcome to the latest episode of the AJ Bell Money & Markets podcast. I'm Dan Coatsworth, and joining me this week is Charlene Young. Hi there, Charlene.

**Charlene Young** (0:16)
Hi, Dan, and hi to everyone tuning in to this week's episode.

**Dan Coatsworth** (0:20)
And we're going to flip the format on its head this week, just to keep things interesting. So rather than start with our usual look at the markets over the past week, we're gonna dive into some interesting personal finance topics, beginning with some fascinating insights into premium bonds.

**Charlene Young** (0:34)
I mean, we are always interesting, but that is right. If you've ever felt frustrated holding premium bonds and never winning a prize, you won't want to miss the information we've got for you.

**Dan Coatsworth** (0:44)
Probate can be a painful experience and is potentially going to become a little bit more stressful because the cost involved is going to go up by quite a bit. So we're gonna chat through this a little bit later in the podcast.

**Charlene Young** (0:54)
Yeah, and we've also got some insight into why student loans have been branded as missold in a scathing report from the Treasury Committee.

**Dan Coatsworth** (1:02)
Terry Smith is one of the UK's best-known fund managers, but his performance with the Fundsmith Equity Fund has been off a little bit recently. Now he's just published a new shareholder letter, and it sort of suggests a massive change to how this fund could be run. And again, we'll talk through all that later in this episode.

**Charlene Young** (1:19)
And World Cup fever has gripped us in England as we progress through the tournament. Dan and I are gonna chat through what that actually means for the wider UK economy.

**Dan Coatsworth** (1:29)
So in the market section, I'll chat about why Sky's buying parts of ITV, whether EasyJet is actually gonna fly off into the sunset following a twist to its takeover story. I also got some juicy tidbits about SpaceX. And of course, Will, as we're recording this, stock markets around the world are having a bit of a wobble and I'll explain why that's happening.

**Charlene Young** (1:47)
Yeah, and finally, our special guests this week are Ryan Hughes and James Flintoft from AJ Bell's Investments team. And they are here to debate all things AI. Our very own Hannah Williford has got her moderator's hat on and we'll be keeping them in check. So lots to discuss and for your listening pleasure.

**Dan Coatsworth** (2:06)
So should we start off with this stuff about premium bonds? So I know someone has held a tiny amount of these premium bonds since I've been born and never once won a prize. I am definitely not excited about the thought of winning because it does feel like the hope has gone. It's literally there's no chance for me. So please, have you got some good news for me or is everyone suffering like me?

**Charlene Young** (2:30)
Well, I mean, you're still hanging on there, Dan, by the signs of it.
I'm sorry to say our research shows that serial losers like yourself could have actually doubled their money elsewhere and maybe a shorter timeframe as well. So you're in good company. There's 14.3 million premium bond holders who have never ever won a prize. So I think that comes to about 62% of all of those with premium bonds.
We dug into this data a little bit deeper. So those who have never won a prize on average have held bonds for 8.1 years. Now, I know you've got a great skincare routine, but I suspect you're slightly older than that. So, yeah, I mean, really kind of reinforcing that point that you've been particularly hard done by there, Dan. But as you know, and as we know, the bonds don't pay any interest. So if you don't win, you won't be guessing a return on your money. You know, hindsight is a wonderful thing. And if you consider that kind of 8.1 year period, that average losing holding of just shy of 129 pounds could have actually grown to 151 pounds if it had been kept in a cash savings account or 330 pounds in a global tracker fund. So obviously we're dealing with the averages there, but it does mean over time, you're losing spending power after inflation and the kind of impact of that can be pretty shocking as well. So to keep the purchasing power to beat inflation, that 128 pound average holding would need to have grown to 191 pounds today. Now, of course, the lure of that million pound prize is pretty compelling and they'll always be people who love freemium bonds. And like you, there'll be those who've never won, but still clinging on to the hope that maybe that day might be around the corner, although I'm sensing some cynicism from you. If you have left your money in these bonds for years, you've got a particular higher balance as well. It's really kind of worth considering how much you've won overall, if anything, and asking yourself whether that has helped you keep pace with inflation on those returns, the prize returns added in, or whether your money really could be working harder for you elsewhere in terms of savings or investments.