This calculator works the weighted annualized investment return (based upon your total winnings to date) if you have purchased Premium Bonds at different times. The purpose of this calculator is to work out the weighted annualized investment return from a collection of premium bonds purchased at different dates (the return being the sum total of your winnings to date).

Most adults are aware of what Premium Bonds are (and probably own some too). For those who are unclear, Premium Bonds are investments issued by National Savings & Investments where the return comes from tax-free prizes, not regular interest.

The definition of Premium Bonds as an “Investment” has often been questioned. Effectively, when you buy Premium Bonds, you are buying the privilege of entering a lottery each month. This is more akin to gambling than to genuine investment. Purchasing a few Premium Bonds for yourself / children / grandchildren has always been popular, and the hook is that you could win the top prize. However, with over 27 Billion bond numbers currently in existence, the odds aren’t exactly on your side.

Problems can occur when some individuals start to treat them like a genuine investment. NS&I themselves explicitly state that Premium Bonds are not suitable for individuals who are looking for a regular income. Most people will have heard stories about friends, neighbors and relatives who hold a lot of Premium Bonds and win prizes almost every month. From this fact they infer that they must be a good investment. As the odds of winning a £50 prize are 24000:1, it is not surprising that individuals who hold the maximum number of Premium Bonds (currently 40,000) win almost every month.

However, if you add up the total prizes won to date and compare it to the number of Premium Bonds purchased and the length of time held, the average return on the original investment is often in the range of 1 – 2 % per annum. The frequency of the winnings all too often masks low real returns. It is clear that if this money was invested in alternative assets such as Deposit Accounts or high-yielding Collective Investment Schemes, a higher return on capital can be generated.