Savings lotteries have become more prevalent in recent times as banks look to incentivise saving without offering better rates. But are they any good?
Nationwide Building Society has launched a new lottery for customers, which automatically enrols them in a monthly prize draw where one lucky winner can scoop £100,000. How does it compare to others?
Nationwide had previously launched different lotteries for different kinds of accounts, including for its Cash Isa and Start to Save products. But this is different in that any Nationwide customer with a mortgage, current account or savings account will be automatically entered. There are 8,008 chances to win each month, with a top prize of £100,000, two £25,000 prizes, five £5,000 prizes and 8,000 £100s up for grabs. The competitions will run monthly for 12 months from September and be selected from a pool of roughly 14 million Nationwide customers.
Nationwide isn’t the only firm to offer savings lotteries to customers. Indeed, with the crashing of savings rates in recent years, it has become a more common incentive to entice new customers without offering better rates.
Perhaps the most ubiquitous of the lot are Premium Bonds. The National Savings & Investments (NS&I) Premium Bonds prize draw is incredibly popular. Some 21 million savers have over £107 billion squirreled away in Premium Bonds according to MoneySavingExpert. Rates were slashed recently though, so the odds of winning anything at all have lengthened considerably. Premium Bonds do still offer good prizes, including two £1 million prizes every month. NS&I says the rate at which you’ll win prizes each year roughly equates to a 1% rate of interest on your savings. This is not however guaranteed, and you could hold the bonds your whole life and win nothing.
The other major savings lottery available at the moment comes from Halifax Bank. It is offering three prizes of £100,000 every month, plus more smaller amounts. To qualify you’ll need to open a savings account with the bank and deposit at least £5,000.
Other banks have recently offered new ‘lottery-style’ accounts, including NatWest, Post Office Money and Family Building Society, but those are currently unavailable to new customers as they have proven so popular.
Overall, the aforementioned lottery accounts can be a good idea if you have smaller sums of cash, as rates on best buy accounts are shockingly low anyway. That being said, the bulk of your savings may be better off elsewhere, such as in investment markets, in order to generate a better rate of return.
If you’d like to discuss options for your cash savings further, don’t hesitate to get in touch with your adviser.