Fed-up savers may test their luck in prize draws with rates so low

Savers facing paltry rates of return may be tempted to "test their luck" in prize draws but could miss out on better deals, analysts say.

The Nationwide Building Society has announced it is to launch a prize draw for its members in England, Wales and Scotland from September.

The UK's largest building society is pitting itself against rival, the Halifax, as well as Premium Bonds.

But analysts at Moneyfacts say savers should not forget to shop around.

"It would not be too unsurprising to see savers turn to a prize draw to test their luck in a low interest rate environment, however, there is no guarantee of winning a prize," said Rachel Springall, from the financial information service.

"Savers may also miss out on a competitive rate of interest choosing to place their cash in an account linked to a prize draw instead of chasing down the best rate available elsewhere."

The Nationwide is extending its previous prize draw for savers by announcing the launch of the lucky dip for members who hold any of its mortgage, saving or current account products.

Only children, and customers from Northern Ireland, will be excluded owing to regulations surrounding draws. Donations to local charities in Northern Ireland will be made instead.

• Are competition lovers being 'taken for a ride'?

Each member will have an equal chance of winning, irrespective of how much they have in their accounts. A new customer can open a savings account for £1 to be entered.

Prizes, drawn each month for a year, range from one jackpot of £100,000, to 8,000 winners of £100 each. The odds of winning a prize are about one in 1,750.

"Members don't need to do anything to take part. As long as they have at least one of our mortgages, savings accounts or current accounts then they are automatically entered," said Louise Prior, from Nationwide.

She said that, were the prize draw funds used to improve interest rates for savers instead, then they would only go up by 0.01%. Those who did not want to take part, perhaps for cultural or religious reasons, could opt out.

Rivals

The Nationwide jackpot matches that of a similar prize draw run by the Halifax, which is part of Lloyds Banking Group.

However, both are dwarfed by the £1m jackpot - at much longer odds - offered by Premium Bonds, run by National Savings and Investments (NS&I).

NS&I is backed by the government. It saw an influx of interest in Premium Bonds from people who were saving money, but could find little in terms of returns elsewhere, during the pandemic. However, it has been heavily criticised for its customer service during the Covid crisis.

• NS&I 'must work hard to win back customers'

With savings rates still at historically low levels, Ms Springall said that other banks and building societies could be thinking of offering prize draws to attract customers. The Family Building Society and NatWest have also offered something similar in recent times.

She warned that customers should compare these deals carefully, check the terms and conditions of each, and watch out for cross-promotion of other products.

"Prize draw customers may well be offered other products from a provider but its wise for consumers to compare deals against the whole of market before they commit," she said.