Premium Bonds explained – Be Clever With Your Cash 

Some articles on the location include affiliate hyperlinks, which give a small fee to assist fund our work. Nevertheless, they gained’t have an effect on the worth you pay or our editorial independence. Read more here.

What are Premium Bonds?

Premium Bonds are a extremely popular kind of financial savings account from Nationwide Financial savings & Investments (NSI) that provide prospects the possibility of profitable money prizes as a substitute of paying curiosity. 

Every bond prices £1 though you must purchase a minimal of £25 value at a time. This will get you 25 entries into every month-to-month draw. The utmost variety of bonds you’ll be able to have is 50,000 value £50,000.

Any prizes you win are tax-free and 100% of your cash is backed by the Treasury. When you have more cash in different NS&I accounts it’ll all be protected – there’s no £85,000 restrict as there may be with suppliers lined by the Financial Compensation Services Scheme. And as with financial savings, your Premium Bonds gained’t lose worth.

Your cash is easy-access so you’ll be able to money the bonds in at any time. Nevertheless, it may possibly take as much as eight working days for the cash to achieve your present account.

Some 24 million individuals have Premium Bonds (together with over 800,000 children) they usually’ve been round for the reason that Fifties. 

The primary prize draw was in 1957 and enjoyable truth – the machine used to generate random numbers for the draw (the Digital Random Quantity Indicator Tools, often known as ERNIE) was invented by a Bletchley Park codebreaker.

Premium Bond prizes

Proper now there are round 5.9 million prizes to win every month starting from £25 to £1m. 

As you’ll be able to anticipate, there are hundreds extra of the decrease worth prizes in comparison with the larger ones. Nearly 99% of the overall variety of prizes are £25, £50 or £100.

There are two £1m prizes to win every month so 24 probabilities a yr to win. However, in actuality, it’s impossible you’ll win certainly one of these large prizes.

The Premium Bond prize charge can change, and it was minimize in January 2025 to 4% from 4.15%.

The prize charge doesn’t imply you’ll get a 4% return in your financial savings. As an alternative, it suggests a mean of £4 is paid out for every bond.

However it’s not as minimize and dry as that as a result of there isn’t a £4 prize! Because the minimal is £25, it means not each bond can win every time. There’s no assure you’ll win something and let’s be sincere, most bonds don’t. 

To provide you an concept of the prizes accessible, listed below are all those listed for the January 2025 draw and the way they evaluate to earlier attracts.

How possible am I to win? 

In the meanwhile, the chances of profitable a prize are 22,000 to 1 – so that they’re not nice.

The more cash you’ve in Premium Bonds, the higher your possibilities of profitable. 

Utilizing an online calculator and primarily based on the 4% prize charge from January, right here’s what your odds of profitable might appear to be, primarily based on the worth of your funding over a yr, primarily based on common luck:

Based mostly on the chart above, even with common luck, everyone seems to be incomes beneath the prize charge. After all, a tiny handful will do much better, however what’s extra possible, is that most individuals gained’t win something. 

Round 14.4million individuals, or two-thirds of Premium Bond holders, have by no means gained a prize with the Premium Bonds, based on a Freedom of Data request made by funding agency AJ Bell. Of the 5.3 million individuals who did win between June 2023 and Could 2024, the common holding was £23,047.

And let’s not overlook Andy’s mates’ expertise with Premium Bonds. The three of them invested £50,000 in Premium Bonds for a yr and had very totally different outcomes. 

Get the perfect of our cash saving content material each Thursday, straight to your inbox

+ Get a £20 Quidco bonus (new members solely). More details

How do Premium Bonds evaluate with financial savings accounts?

Following one other minimize to the Bank of England base rate in November, financial savings charges are falling. And with additional cuts predicted this yr, this might proceed.

That’s to not say the prize charge of Premium Bonds can’t fall too.

But when we have a look at the top rates of easy access accounts, that are the closest comparable account to Premium Bonds, new prospects can fairly a bit greater than the Premium Bond prize charge and it’s assured. 

You could possibly additionally take into account a Cash ISA, which regularly beat the prize charge too, and all of your returns will probably be tax free.

You could possibly get a fair greater charge with some restrictions. For instance, Santander pays 6% on as much as £4,000 on its Edge Saver (you’ll want a Santander present account) whereas there are regular savers providing as much as 8%.

As a common rule once you’re taking a look at financial savings charges, if it’s the identical or greater than the Premium Bonds prize charge, you’ll most likely be higher off going with the financial savings account. Nevertheless, in the event that they’re variable charges, they may change, so it’s essential to regulate your accounts.

Premium Bonds and tax

Any prizes you win are tax-free – and this is usually a large draw for those who’re somebody who’s prone to pay tax in your financial savings curiosity or are a better or further charge taxpayer. 

If we have a look at customary financial savings accounts, although not ISAs, solely a number of the curiosity you earn is tax free.

For those who’re a primary charge taxpayer you get a £1,000 Personal Savings Allowance annually and for those who’re a better charge taxpayer you get a £500 allowance. Any financial savings curiosity above this will probably be taxed at your common tax charge. 

Further charge taxpayers don’t get any tax-free allowance – which suggests any financial savings curiosity you earn will probably be taxed. It’s why Premium Bonds could be far more interesting to these on greater incomes, particularly in the event that they’ve additionally exceeded their annual ISA allowance.

Ought to I purchase Premium Bonds?

For most individuals, financial savings accounts are a greater possibility than Premium Bonds, particularly for the reason that prize charge has been minimize.

However for the upper earners, they could nonetheless maintain a little bit of attract due to the tax-free prizes.

ISAs ought to be your first port of name however for those who’ve maxed out your £20,000 allowance and also you’re prone to pay tax in your financial savings curiosity, Premium Bonds could be value contemplating.

Otherwise you would possibly like Premium Bonds due to the fun of probably profitable 1,000,000 kilos – or different beneficiant prizes. Nevertheless, whereas somebody has to win it (they usually do!) many individuals by no means will and you might get completely no return in your cash for so long as you’ve the bonds.

Typically talking, even when you’ve got the utmost £50,000 in Premium Bonds, you’re nonetheless far in need of the charges of the highest easy-access or limited-access accounts.

It’s additionally not a fantastic concept to have that a lot cash in easy-access accounts anyway. As a rule of thumb, you need to hold between three and 6 months outgoings in these accounts to be sure you’re lined in case of an emergency. This might embody shedding your job, changing the boiler or fixing your automobile if one thing goes unsuitable with it unexpectedly.

Your cash’s greatest positioned in an easy-access account or Money ISA paying a high charge after which you’ll be able to take into account different choices relying on how a lot money you’ve and what your objectives are.

For instance, for long-term saving it’s possible you’ll need to take into account investing or contributing extra to your pension, and taking advantage of the tax benefits.

How do I purchase Premium Bonds?

It’s a must to be over 16 years outdated to purchase Premium Bonds for your self.

You will get Premium Bonds from the NS&I website. Alternatively you should purchase them through the publish or by cellphone.

However for those who’re shopping for Premium Bonds for another person’s children, you’ll be able to’t purchase them over the cellphone, and also you gained’t be capable of purchase Premium Bonds for your self or anyone else by bank card.

When to purchase Premium Bonds

The Premium Bond attracts happen initially of every month, however you’re solely eligible for every draw on bonds which have been invested for a full month.

This implies you’re higher off shopping for them on the finish of a calendar month than at some other level.

How will I do know if I’ve gained a prize?

The quickest solution to discover out for those who’ve gained is by getting into your account quantity into the NS&I Premium Bond prize checker or the app model (you will get this on the App retailer or Google Play). It’ll present you this month’s prizes, something you’ve gained within the earlier six months and any older prizes you’ve not claimed but.

You may also ask Alexa for those who’ve gained. You’ll must open the Talent on the Alexa app and comply with the steps.