Let's be honest when you've got £50,000 sitting around, you want it working hard for you. But where's the best place to park it? The choice between Premium Bonds and savings accounts keeps many of us scratching our heads. I've been there myself, and after digging deep into both options, here's what I've learned from real experience.
1. Premium Bonds – The Thrill of the Draw
Remember when Mrs Jones down the street won £25,000 last Christmas? That's Premium Bonds for you. Instead of boring old interest, your money enters a monthly lottery where you could win anything from £25 to £1 million.
What you should know:
Your £50k would buy you 50,000 entries (each bond is £1)
Current "prize rate" is about 4.4%, but that's an average you might win more or nothing
It's like playing the lottery where you never lose your stake
I once held the maximum £50k for 18 months and won £375 total not terrible, but not amazing either.
2. Savings Accounts – The Steady Eddie Option
My cousin Sarah swears by fixed-rate accounts. She locked in £50k at 5.2% last year and is happily earning £2,600 annually. No surprises, no fuss.
The current landscape:
Best easy-access accounts pay around 4.5%
1-year fixes hover near 5.1%
2-year fixes can reach 4.8%
The catch? You'll pay tax on interest over £1,000 (or £500 if you're a higher earner).
3. The Numbers Game – What £50k Really Earns
Let's look at my friend's actual results from last year:
| Option | Amount | Return | Notes |
|---|---|---|---|
| Premium Bonds | £50k | £450 | 3 small wins |
| Easy Access Savings | £50k | £2,250 | 4.5% rate |
| 1-Year Fixed | £50k | £2,550 | 5.1% rate |
The fixed saver clearly won, but Premium Bonds gave him the excitement of checking for wins each month.
4. Tax Tricks You Should Know
Here's where it gets interesting. As a basic rate taxpayer:
Savings interest over £1,000 gets taxed at 20%
Premium Bond prizes are completely tax-free
My accountant friend Mike told me about a client who switched £50k from savings to Premium Bonds simply to avoid £380 in annual tax.
5. When You Might Need the Money
Last March, I needed £15k quickly for a home repair. Good thing I had:
£20k in easy-access savings (available same day)
£30k in Premium Bonds (took 3 days to access)
Fixed savers would have charged me a penalty to withdraw early.
6. Safety First – Where Your Money's Protected
Both options are rock-solid safe:
Premium Bonds: Backed by HM Treasury (no limit)
Savings: FSCS protects up to £85k per bank
I sleep better knowing my £50k is protected either way.
7. The Winner? It Depends on You
After helping dozens of friends with this decision, here's my cheat sheet:
Choose Premium Bonds if:
You enjoy the excitement of potentially winning big
You're a higher-rate taxpayer wanting tax-free returns
You've already used up your personal savings allowance
Choose Savings if:
You prefer predictable returns
You might need quick access to cash
You're happy to shop around for the best rates
My Personal Strategy
Here's what I do with my £50k:
£20k in Premium Bonds (for the fun factor and tax benefits)
£25k in a 1-year fixed saver (for guaranteed growth)
£5k in easy-access (for emergencies)
This mix gives me security, growth, and a little excitement each month.
Final Tip – Don't Overthink It
The truth? Neither option is "bad". The worst mistake is leaving money languishing in a current account earning nothing.
Action Steps:
Check your existing: savings rates are you getting less than 4%? Time to move
Consider your tax situation: could Premium Bonds save you money?
Decide your priority: steady growth or potential big wins
Remember, you can always split your money like I do. The important thing is to make a decision and get your money working for you.