Premium Bonds savers warned common mistake will slash your odds of winning to zero

Premium Bonds savers disappointed by their lack of wins have been warned not to make a common mistake that could actually mean they miss out on a chance to bag a prize.

The prize fund rate for Premium Bonds fell from 4% to 3.8% from the April draw, with the odds of each £1 Bond winning at 22,000 to one.

But people may misunderstand how the system works leading them to act rashly in a way that could mean their Bonds end up missing out at a chance of a win.

Andrew Gosselin, personal finance expert and senior contributor for coupon code database , warned against the misconception that older Bonds have a lower chance of winning.

He said: "Some holders wonder whether long-dormant bonds have grown 'cold' and should be refreshed. The draw does not work like a lottery where numbers become overdue; every pound has the same chance every month, whatever its purchase date.

"Selling and repurchasing bonds merely resets the clock for eligibility and may even lose a month of entry without changing the probability. Anyone who has gone a year or more without a win is experiencing the typical pattern, not evidence of bad luck."

When you purchase new Bonds, you have to hold them for a full month before they go into the draw, so if you cash in all your Bonds and buy some more just to get newer numbers, you will have no chance of a prize in next month's draw while your odds of winning going forward will be the same as before.

In the May prize draw, a person who previously had just £2 in Bonds, which they purchased over 65 years ago in January 1957, won a £10,000 prize.

The best way to increase your chances of winning is to buy more Bonds, as this means you have more entries going into each month's draw.

But Mr Gosselin warned about another potential misunderstanding here: "Increasing the size of a holding does raise the number of entries, yet it does not bend probability in favour of a large amount."

The vast majority of prizes in each draw - 80% - are for the lower amounts of £100, £50 and £25. In the May draw, of the total 5.9million prizes, over 2.1million were for £25.

The finance expert also pointed out that Premium Bonds offer no guarantee of growing your money - in fact you'll be losing out if you win nothing.

Mr Gosselin spelled out the stark reality: "They shield capital, but unless prizes arrive, real value shrinks once everyday prices move ahead."

One attraction of Premium Bonds is that as with other savings with NS&I, all your funds are backed by the Treasury, but this sense of security may be misleading.

Ben Faulkner, communications director at , explained: "As Premium Bonds are backed by the Government, they are very safe investments.

"However, bank and building society accounts are now guaranteed up to £85,000 per institution via the Financial Services Compensation Scheme, so for many there is little advantage to Premium Bonds from a risk perspective."

You can hold up to £50,000 in Premium Bonds. Some savers set up their account so any wins are used to buy more Bonds, so increasing their chances of winning again.

Unlucky customers who have gone many months without bagging a win may be thinking of looking elsewhere. Joerg Nottebaum, financial analyst with online lottery group , suggested some alternative places for your savings.

He said: "If stability and guaranteed returns matter more than excitement, diversifying into fixed-rate or notice savings accounts may offer better peace of mind. Consider reviewing your position annually based on performance.

"Premium Bonds remain a low-risk, tax-free savings option with prize potential, but they shouldn't be your only strategy."