For some reason I have a very clear memory of opening a building society account when I was about nine or ten years old. It was a savings account offering – I think – a 12% interest rate. Certainly, back in the mid-1980s, interest rates were exceptionally high compared to today’s miniscule percentages. Anyway, I liked the idea that I’d get 12p back on each pound and only wished I had more money to squirrel away. Today, my own children put money aside, but the return they get on their savings is negligible. So it’s unsurprising that my eye was caught by this article about prize draw savings accounts.
What are prize draw savings accounts?
Prize draw savings accounts are nothing new. Most people are very familiar with NS&I Premium Bonds. Each £1 bond you buy is entered into a monthly prize draw. The winning bonds are selected by ERNIE, which pub quiz aficionados will know stands for Electronic Random Number Indicator Equipment. Prizes range from £25 right up to £1 million.
While popular, Premium Bonds aren’t really the smartest investment. Your bonds don’t attract any interest at all, and your chances of winning are small. The odds of a single bond winning £25 in any given month is 1 in 35,000. The likelihood of that bond winning £1 million is one in 53,874,665,977!
Of course, the more bonds you have, the better your chances. But I’ll leave you to do the maths!
New prize draw savings accounts
No doubt worried by low interest rates deterring savers, High Street banks and building societies are now launching prize draws of their own. The latest one is from the Nationwide Building Society. If you have a current or savings account or a mortgage with Nationwide, you’ll be entered into a prize draw on the second Tuesday of September (unless you choose to opt out).
This is the fourth Nationwide prize draw in recent times. The top prize is £100,000, while smaller prizes will be of £25,000, £10,000 and £100. The chance of winning the top prize is 14.2 million to one. There’s a 1,773 to one chance of winning any prize.
The odds might be better than those offered by Premium Bonds, but there are fewer prizes on offer and the jackpot is much smaller.
Nationwide isn’t alone in offering customers prize draws. Halifax now has a Savers Prize Draw open to people with more than £5,000 in qualifying accounts (most savings and ISA accounts, except those for children). The top prize is also £100,000, while smaller prizes are for £1,000 and £100. The Family Building Society also has a ‘Windfall Bond’ prize account, although this is now closed to new customers.
Are these prize draws worth it?
If you are entered in any draw, there’s an outside chance that you could win. And let’s be honest, that’s quite a fun and attractive thought. However, these draws are unlikely to be your route to riches.
That said, as the Nationwide and Halifax draws are open to customers who already have accounts, they gives you a small chance of winning a prize without having to put your money in a non-interest-paying account. So taking part does no harm and may even do a lot of good!
The big problem is that neither savings accounts or prize draws do reliably much to grow your capital these days. For that, there are two main strategies worth considering – making smart investments and cutting your tax bills. For the former, it’s worth talking to an Independent Financial Advisor. However, if you don’t want to pay more tax than you should, why not speak to us today about our Tax Planning service? Our experts can help you look ahead and keep your bills low – though whether you put any money you save into a prize draw savings account is up to you!
About Ben Locker
Ben Locker is a copywriter who specialises in business-to-business marketing, writing about everything from software and accountancy to construction and power tools. He co-founded the Professional Copywriters’ Network, the UK’s association for commercial writers, and is named in Direct Marketing Association research as ‘one of the copywriters who copywriters rate’.