Yes, all savings, including prize bonds,get inflated away.
At a guess, 5 pounds may have been a weeks wages in 1960... 10 pounds was probably a weeks wages in 1970, and you could purchase 2 prize bonds for 10 pounds. Now, in 2010, a weeks wages may by 500 Euro, which would get you 80 prize bonds @ 4 pbs for 25 Euro
If any winnings from the prize bond had been used to purchase more prize bonds then it wouldn't seem so bad today... this is similar to 5 pounds lodged to a bank account in 1970 which would also be vitually worthless today, even if it was a few days wages when lodged