How long does it take to get money out of Premium Bonds?

I am thinking of moving my rainy day savings fund into Premium Bonds now that the prize fund rate has gone up to 3 per cent.

I know this rate of return isn’t guaranteed but it compares well with the best easy access savings rates and I think Premium Bond prizes are tax-free, is that true?

If I needed to get money out, how long does it take to withdraw cash from Premium Bonds?

Premium Bonds are the UK’s biggest savings product, with more than 21 million people saving more than £119 billion in them. 

Ed Magnus of This is Money replies: Firstly, you are right, Premium Bond prizes are tax-free – something that makes them look even more attractive with the new prize rate and means they can be compared to the best cash Isas.

But can Premium Bonds be considered akin to easy access savings accounts?  Arguably so, as they do allow you to withdraw your money on-demand and without penalty but as we explain below you may have to wait a couple of days.

With the prize fund rate at 3 per cent, Premium Bonds could prove to be a more exciting home for your rainy day savings fund.

By comparison, in terms of the best deals, Zopa Bank currently pays 2.86 per cent on its easy-access account while Yorkshire Building Society’s Rainy Day Saver pays 3 per cent, but this is severely limited as that rate is only paid on the first £5,000 in the account. You can check the best easy-access savings rates in our tables. 

Arguably, the Premium Bonds rate stacks up well against these, but remember that prizes are not guaranteed and you may do better or worse than that average rate.

Instead of earning a steady rate of interest, with Premium Bonds, you¿ll be entered into a draw each month for the chance to win a cash prize ranging from £25 to £1 million.

Instead of earning a steady rate of interest, with Premium Bonds, you’ll be entered into a draw each month for the chance to win a cash prize ranging from £25 to £1 million.

How long does it take to withdraw money from Premium Bonds?

In terms of withdrawals, NS&I says that if you are planning to use the telephone or online channel, then provided it receives your instruction to withdraw by 8pm on a given day, the funds should be in your bank account within two working days.

Anyone placing their instruction on Thursday, Friday, Saturday or Sunday will therefore face a longer wait for their cash due to the weekend.

For example, were you to request a withdrawal on a Friday before 8pm, you would have to wait until the following Tuesday to receive your cash.  

If you are using the post, it will still take NS&I two working days to process, but this is from when NS&I receives your instruction in the post, so will likely take longer.

Luckily there’s a very handy withdrawal calculator on its website that should also prove useful.

We spoke to a spokesperson from The Savings Guru to see if they could offer some further insight for our reader.

Is NS&I’s withdrawal calculator accurate? 

The Savings Guru replies: The NS&I calculator is correct and does work like that. It uses BACS to make payments, which takes up to three working days.

This is definitely something that savers using Premium Bonds should be mindful of when withdrawing – particularly over weekends.

For someone withdrawing on a Saturday morning won’t see the money in their account until Wednesday.

How does NS&I compare to other savings providers?

The Savings Guru replies: NS&I is slower on premium Bonds compared to instant access savings providers. There is a large variance in timescales with the likes of Chase being almost instant, app based providers Zopa and Tandem, who use open banking, being very quick.

Officially they are within two hours but both are usually done within a few minutes.

Typically, most payments are done via Faster Payments which usually takes up to 2 hours but it is something worth checking with each provider as not all accounts are the same.

RCI Bank, for example, pays out the following day if they get your withdrawal before 2pm – but it’s another day if not.

For example, an RCI saver giving notice at 3pm on the Monday may not see their funds in their account until the end of day on the Wednesday.

Any other words of advice?

The Savings Guru replies: On a more general point on your reader question, your saver is right that the 3 per cent prize pool compares favourably with the best savings rates.

But remember, this is an average so to pay the £1m prizes this means other savers get nothing.

So a saver with the maximum £50,000 and median average winnings will get £1,000 per year, which is a 2 per cent return.

I always say that Premium Bonds are better than the lottery, and they’re great for that thrill of whether you will win a prize or not.

However, only use them if you are happy with getting nothing each month – as there’s good odds of that happening unless you’ve got £13,000 or more saved.