Chip Prize Savings vs Premium Bonds: The Truth Behind "3.5x Better Odds"

Chip's Prize Savings Account claims odds "over 3.5 times better than Premium Bonds." We've verified the maths — and the claim is technically true. But better odds of winningsomething doesn't mean better expected returns. Here's the full picture Chip's marketing doesn't show you.

The "3.5x Better Odds" Claim: Verified

Let's start by checking Chip's headline claim. They state their odds are "over 3.5 times better than Premium Bonds." Here's the calculation:

The maths checks out. With Chip, you're roughly 3.5 times more likely to win any prize compared to Premium Bonds. But here's the critical question the marketing glosses over: does winning more often mean earning more money?

What Chip Doesn't Tell You: The Expected Return Problem

Premium Bonds publishes a clear prize fund rate of 3.6%. This means, on average across all bondholders, the total prizes paid out equal 3.6% of total holdings annually. You can calculate your expected return precisely.

Chip publishes no equivalent figure. They tell you the odds of winning, but not the overall prize rate. To understand what you might actually earn, we need to do some detective work using their published prize pools.

Chip's Prize Pool: Extreme Variance

Here's what Chip is awarding in recent months:

That's a 40x difference between the lowest and highest months. In November, Chip awards £12,500 total. In December, it's £500,000. Premium Bonds, by contrast, pay out over 6 million prizes every single month at a consistent 3.6% rate.

Estimating Chip's Actual Prize Rate

Since Chip doesn't publish their equivalent of a "prize fund rate," we need to estimate it. Using their published odds data, we can work backwards to approximate their total deposits.

Effective Monthly Rates

Using our £40 million estimate, here's what Chip's effective prize rate looks like each month:

The variance is stark. In a "low" month like November, Chip's effective rate is just 0.38% annualized — roughly one-tenth of Premium Bonds' 3.6%. In December's promotional month, it shoots up to 15% annualized.

What Might a Full Year Look Like?

We can model different scenarios based on Chip's prize schedule patterns:

Even in our optimistic scenario, Chip's estimated rate (3.4%) falls short of Premium Bonds' guaranteed 3.6%. In the conservative scenario, it's barely half.

Winning More Often vs Winning More Money

Here's the fundamental issue with the "3.5x better odds" marketing: probability of winning any prize is not the same as expected value.

Probability of Winning At Least Once Per Year

Let's compare the chance of winning something over 12 months with a £1,000 holding:

With £1,000, you're 1.68x more likely to win at least once with Chip than Premium Bonds (71.7% vs 42.7%). But this doesn't account for how muchyou win when you do win, or the overall expected return.

Expected Monthly Return: £1,000 Holding

Protection and Security: A Critical Difference

Beyond the numbers, there's a fundamental difference in how your money is protected:

That last point is crucial. Chip explicitly states: "Prizes are not FSCS eligible until they have been withdrawn back to your linked account." If Chip experienced financial difficulties before you withdrew a prize, that prize could be at risk.

The Tax Question

Both products market themselves as "tax-free," but there's a subtle difference:

• Premium Bonds: Explicitly tax-free under Treasury rules. No caveats.
• Chip: States prizes are "tax-free" but includes the disclaimer:"Winners will be responsible for any individual tax liabilities. The Promoter is not able to provide tax advice."

This likely covers Chip legally for unusual circumstances, but it's worth noting the different confidence levels in their tax status claims.

Where Chip Does Win

To be fair, Chip has genuine advantages in certain areas:

Who Should Choose Which?

The Transparency Problem

Our biggest concern with Chip isn't the product itself — it's the transparency gap. Premium Bonds publishes:

• Prize fund rate (3.6%)
• Exact odds (1 in 22,000)
• Total bonds in circulation
• Complete prize distribution
• Historical data going back decades

Chip publishes odds and monthly prize pools, but not:

• Total deposits in the Prize Savings Account
• An equivalent "prize fund rate"
• Any commitment to future prize levels
• Historical average returns

This makes it impossible for savers to calculate their expected return accurately. The "3.5x better odds" headline is technically true but potentially misleading without the context of what you actually expect to win.

Conclusion: Better Odds ≠ Better Returns

Chip's "3.5x better odds" claim is mathematically correct. You are significantly more likely to win something with Chip compared to Premium Bonds.

But odds of winning aren't the whole story. Based on our analysis:

• Chip's effective prize rate appears to be 1.9% - 3.4% depending on their prize schedule, compared to Premium Bonds' consistent 3.6%
• Chip's monthly prize pools vary by 40x, creating massive uncertainty
• Premium Bonds offer unlimited government backing; Chip has FSCS limits and prizes aren't protected until withdrawn

For most UK savers, Premium Bonds remain the more predictable, transparent choice. Chip might appeal to those who value higher variance, have more than £50,000 to save, or prefer the psychological reward of more frequent wins — even if those wins may add up to less overall.

Disclaimer: This analysis is based on publicly available information from Chip's website as of January 2025. Our deposit estimates and effective rate calculations are approximations based on published odds and prize data — Chip does not publish these figures directly. Premium Bonds data is sourced from NS&I. This article is for informational purposes only and does not constitute financial advice. Prize rates and terms for both products may change at any time.