Premium Bonds are one of the UK’s most popular savings products, offering a unique way to save while having the chance to win tax-free cash prizes. Unlike traditional savings accounts that provide interest on your deposits, Premium Bonds offer a prize draw system where savers can win monthly cash prizes ranging from £25 to £1 million. This makes them an appealing option for those who enjoy the thrill of potentially earning a return without any risk to their initial investment. However, since winnings are not guaranteed, they may not be the best option for those seeking steady, predictable growth in their savings.
But are they worth it? In this guide, we’ll explain how Premium Bonds work, who they’re for, how they compare to other savings options, and whether you should invest in them.
What Are Premium Bonds?
Premium Bonds are a savings product offered by NS&I (National Savings and Investments), a government-backed organisation. Premium Bonds work slightly differently than a standard savings account, where you earn a fixed interest rate over time. Instead of accruing interest, your money is entered into a monthly prize draw, allowing you to win tax-free cash prizes.
How They Work
- Every £1 you invest buys one Premium Bond, which means that if you invest £100, you’ll receive 100 individual bond numbers. Each number represents a separate chance to win in the monthly draw.
- Your savings are entered into a monthly prize draw, meaning you get repeated opportunities to win cash prizes without putting in extra money. Unlike a lottery, you don’t lose your original investment, so your capital remains safe.
- No interest is earned, which means that if you don’t win, your money won’t grow like it would in a standard savings account. Instead, any returns depend entirely on luck and whether your bond numbers are drawn.
Your Money Is Safe
- NS&I is backed by the UK government, ensuring your savings are 100% secure. No matter what happens to the economy or financial markets, your investment is fully protected.
- Unlike traditional bank accounts, which are only protected up to £85,000 under the Financial Services Compensation Scheme (FSCS), Premium Bonds provide complete security with no upper limit. Whether you invest £100 or a maximum of £50,000, your entire investment remains safe.
History of Premium Bonds in the UK
Origins and Evolution
- Harold Macmillan’s government introduced Premium Bonds in 1956 to encourage more people to save money while giving them a chance to win cash prizes. The idea was simple: rather than earning interest on savings, holders of Premium Bonds would be entered into a prize draw, making saving an exciting prospect.
- At the time, Premium Bonds were groundbreaking, blending financial security with a lottery-style incentive. Initially, they were met with scepticism, with some critics branding them as a form of gambling. However, they quickly gained popularity, with millions investing within the first few years.
- The system has evolved significantly over the decades, with regular increases in the prize fund and the introduction of larger jackpot prizes. When it first launched, the highest award was only £1,000, whereas today, two lucky winners receive £1 million monthly.
- Technology has dramatically improved the prize draw process. Originally, winning numbers were selected manually. However, as demand grew, the government introduced the first version of ERNIE (Electronic Random Number Indicator Equipment) in 1957. This innovative machine used random electrical noise to generate winning numbers, ensuring fairness and transparency.
- ERNIE has been upgraded multiple times, with the latest version, ERNIE 5, being introduced in 2019. The current system can generate results much faster and with an even higher level of randomness, ensuring that every bondholder has an equal chance of winning.
- Today, Premium Bonds are one of the most popular savings products in the UK, with millions of bondholders holding billions of pounds in Premium Bonds. The prize fund is continually adjusted based on market conditions, keeping it competitive with traditional savings accounts and investment options.
How Do Premium Bonds Work?
Steps to Owning Premium Bonds:
- Buy Bonds: Getting started with Premium Bonds is easy. You can buy them directly from NS&I, online, over the phone, or by post. The minimum purchase amount is £25, and you can invest up to a maximum of £50,000. You can also set up a standing order to invest regularly to build up your savings over time.
- Receive Unique Bond Numbers: Every £1 you invest gets you one individual bond number. So, if you invest £100, you receive 100 separate chances to win. The more bonds you hold, the more entries you have in each monthly prize draw, increasing your chances of winning.
- Enter Monthly Prize Draws: Each month, all Premium Bond numbers are entered into a prize draw, and the winners are chosen by ERNIE, NS&I’s Electronic Random Number Indicator Equipment. This system generates random numbers, ensuring fairness for all bondholders, regardless of when they bought their bonds.
- Tax-Free Winnings: One of the biggest perks of Premium Bonds is that all winnings are completely tax-free. If you win a prize, you keep 100% of it, with no deductions for tax. You can have your winnings paid directly into your bank account, reinvest them into more Premium Bonds, or receive them by cheque.
- Managing Your Bonds: Once you’ve purchased Premium Bonds, you can easily track your investments and winnings online via NS&I’s website or mobile app. Suppose you ever decide to cash in your bonds. In that case, you can do so without penalties, and your money will be returned to your nominated bank account within a few working days.
What Prizes Can You Win?
Prize Levels
Premium Bonds offer a range of tax-free cash prizes, with winners selected every month. The top prize is a life-changing £1 million, with two winners drawn each month. Beyond that, there are thousands of smaller cash prizes available.
- £1 million (Two winners per month)
- £100,000, £50,000, £25,000, £10,000, £5,000 – Higher-tier prizes, though much rarer.
- £1,000, £500, £100, and £25 – These make up the majority of the prizes awarded each month.
Prize Breakdown Table
| Prize Amount | Number of Winners (Approx.) |
|---|---|
| £1 million | 2 per month |
| £100,000 | Few dozen |
| £50,000 | Few dozen |
| £25,000 | Few dozen |
| £10,000 | Hundreds |
| £5,000 | Hundreds |
| £1,000 | Thousands |
| £500 | Thousands |
| £100 | Hundreds of thousands |
| £25 | Millions |
Your Chances of Winning
Winning with Premium Bonds is purely a game of chance. The odds of winning any prize are 1 in 21,000 per £1 bond (as of 2024). While these odds might seem daunting, the more bonds you hold, the higher your chances of winning.
- If you invest £1,000, you have 1,000 chances to win each month.
- If you invest a maximum of £50,000, you have 50,000 chances to win.
- However, there’s no guarantee you’ll win anything, even if you hold the maximum number of bonds.
This prize-based system makes Premium Bonds an exciting savings option. Still, it’s essential to remember that you won’t receive guaranteed returns like with a traditional savings account.
Who Are Premium Bonds For?
Premium Bonds can be an attractive savings option for a specific type of saver, particularly those who value security and the possibility of winning tax-free prizes over predictable returns. Since Premium Bonds are issued by National Savings & Investments (NS&I), they are fully backed by the UK government, making them one of the safest places to hold your money. This can be particularly appealing if you are risk-averse and want to protect your savings, even during economic uncertainty.
Another key feature of Premium Bonds is the lottery-style prize draw, which replaces traditional interest payments. This means they may be suitable for people who enjoy the excitement in their savings strategy and are comfortable with the possibility of earning nothing in some months while hoping for a big payout in others. Since there is no guarantee of returns, Premium Bonds are most appropriate for those who can afford to wait and see if their luck plays out rather than individuals who rely on regular interest income to support their financial needs.
Additionally, Premium Bonds could be a helpful option for those who have already made full use of other tax-efficient savings accounts, such as Individual Savings Accounts (ISAs). Since Premium Bond prizes are tax-free, they can be a good supplement to an existing savings strategy, especially for those in higher tax brackets who want to avoid paying tax on interest earned from traditional savings accounts. However, for individuals who haven’t yet maximised their ISA allowance, prioritising an ISA may be a more strategic choice before turning to Premium Bonds, as ISAs offer both tax efficiency and guaranteed interest in the case of cash ISAs.
Finally, Premium Bonds might appeal to people who prefer flexible savings. Unlike fixed-term savings accounts or investments that require a long-term commitment, Premium Bonds can be cashed in at any time without penalties, making them a practical choice for those who want the option to access their money quickly if needed. However, because there is no guaranteed return, they may not be the best option for individuals seeking consistent growth or those with short-term financial goals. Instead, they are better suited for savers who are content with the prospect of potentially winning big while maintaining the security of their initial deposit.
Should You Use Premium Bonds?
✅ Advantages
- 100% Safe—The UK government completely protects your money, making it one of the most secure places to store your savings.
- Tax-Free Prizes – Unlike traditional savings accounts, any winnings from Premium Bonds are entirely tax-free, which can be especially beneficial for higher-rate taxpayers.
- No Lock-In Period – Need your money back? You can withdraw your savings at any time without facing any penalties or fees.
- Excitement Factor – With a monthly prize draw, Premium Bonds add a fun, lottery-like element to saving, offering the chance to win anything from £25 to £1 million.
❌ Disadvantages
- 🔴 No Guaranteed Returns—There is no certainty of earning anything, unlike in a regular savings account, where interest accrues over time.
- 🔴 Inflation Can Eat Away Value – While your money is safe, its purchasing power may decline as inflation rises, especially if you don’t win prizes regularly.
- 🔴 Better Interest Rates Elsewhere – Many high-interest savings accounts offer guaranteed returns that can outperform the average prize winnings from Premium Bonds.
Premium Bonds vs. Regular Savings Accounts
| Feature | Premium Bonds | Regular Savings Account |
|---|---|---|
| Returns | No guaranteed returns | Guaranteed interest |
| Tax Treatment | Tax-free prizes | Interest may be taxable |
| Risk | 100% government-backed | Protected up to £85,000 (FSCS) |
| Access to Money | Easy withdrawal | Varies (instant access or fixed-term) |
| Fun Factor | Chance to win big | Steady and reliable growth |
Premium Bonds are a great addition to your savings portfolio if you enjoy the thrill of winning a tax-free cash prize and can afford to take the chance. However, a high-interest savings account may be better if you prefer steady, guaranteed growth. The right option depends on your financial goals and whether you’re comfortable with the unpredictable nature of Premium Bond returns.
How to Manage Your Premium Bonds
Once you’ve invested in Premium Bonds, managing them effectively is key to tracking your winnings, making withdrawals, and ensuring your savings strategy aligns with your financial goals. Here’s a detailed guide on how to check your winnings, withdraw money, and stay on top of your Premium Bonds.
Premium Bonds Prize Checker: How to Check If You’ve Won
Premium Bond prize draws occur monthly, and NS&I offers several ways to check if you’ve won. Since there are no physical prize notifications, it’s up to you to stay updated on your winnings.
1. NS&I Website – The Official Premium Bonds Prize Checker
One of the easiest ways to check if you’ve won a prize is by using the Premium Bonds Prize Checker tool on their official website. Enter your holder’s number to see if you’ve won an award in the latest draw. You can also check past winnings to keep track of your prize history.
Where to check: NS&I Official Website
2. NS&I App – Instant Prize Notifications
For a more convenient way to monitor your winnings, you can download the NS&I app on your smartphone. This app not only allows you to check prizes but also gives you instant notifications if you win. It’s an excellent option for those who don’t want to manually check every month.
✅ Benefits of the NS&I App:
- Instant notifications if you win a prize
- Ability to check all past winnings
- Secure access to manage your Premium Bonds
🔹 Where to Download: Available on iOS (Apple Store) and Android (Google Play Store).
3. NS&I Prize Checker Hotline – Call to Check Your Status
Do you prefer to check your winnings the old-fashioned way? You can call the Premium Bonds Prize Checker hotline to determine if you’ve won. Have your holder’s number ready when calling to get quick results.
📞 NS&I Prize Checker Hotline: 08085 007 007 (UK)
4. Prize Payments – What Happens When You Win?
If you win a prize, you can choose how you want to receive your winnings:
- Paid directly into your bank account (fastest method).
- Reinvested into more Premium Bonds (increases your chances of winning again).
- Sent as a cheque (less common, but still an option).
💡 Tip: Setting up automatic reinvestment can help boost your savings without any effort, as your winnings will be used to buy more bonds automatically.
How Do You Withdraw Money?
Withdrawing money from Premium Bonds is straightforward, but it’s important to note that it’s not instant like withdrawing from a regular bank account. Here’s what you need to know.
Ways to Request a Withdrawal
You can withdraw money from your Premium Bonds using three methods:
- Online: Log in to your NS&I online account and request a withdrawal.
- By Phone: Call NS&I customer service and request a withdrawal over the phone.
- By Post: Send a written request by post, but note that this method takes the longest.
📞 NS&I Contact Number for Withdrawals: 08085 007 007
How Long Do Withdrawals Take?
Unlike instant bank transfers, withdrawing money from Premium Bonds can take 3 to 8 working days. This is because NS&I needs to cash in the specific bonds and transfer the funds to your designated bank account.
⏳ Typical Withdrawal Timeline:
- Online or phone requests: 3–5 working days
- Postal requests: Up to 8 working days
💡 Tip: If you anticipate needing your money soon, withdraw it well in advance to avoid delays.
How Will You Receive the Money?
Once your withdrawal is processed, NS&I will transfer the money directly to your bank account. Alternatively, you can request a cheque, but this is slower.
Managing Your Premium Bonds Efficiently
To make the most of your Premium Bonds, consider these best practices:
✅ Set a Reminder to Check for Winnings. While the NS&I app sends notifications, manually checking each month is still a good idea.
✅ Keep Your Details Updated – If you change your bank account, address, or email, update NS&I immediately to avoid issues with prize payments.
✅ Decide on a Strategy for Winnings—To maximise your chances of winning, consider reinvesting your prizes into more bonds instead of withdrawing them.
✅ Know When to Withdraw—If you need access to funds quickly, plan ahead, as withdrawals aren’t instant.
Managing Premium Bonds is simple: once you check regularly, update your details, and plan withdrawals in advance. Whether you’re in it for the long-term savings potential or the excitement of the monthly prize draw, staying informed ensures you make the most of your Premium Bond investment.
What Happens If You Inherit
Inheriting Premium Bonds differs slightly from inheriting other financial assets like savings accounts or investments. The process is managed by NS&I’s bereavement team, ensuring that the bonds are kept in the prize draw or cashed out according to the estate’s instructions. Here’s what you need to know if you inherit Premium Bonds.
- What Happens to Premium Bonds When the Owner Dies?
When someone who holds Premium Bonds passes away, their bonds do not immediately lose their eligibility for the prize draw. Instead, they remain in the monthly prize draw for up to 12 months after the date of death. This means that even after the bondholder has passed, their bonds still have a chance to win prizes.
Any winnings during this period will be paid to the estate and distributed according to the will or intestacy rules. If a bondholder wins the £1 million jackpot, NS&I will confirm details with the executors before awarding the prize.
- How Can Beneficiaries Claim or Cash Out Inherited Bonds?
Once the estate has been settled, beneficiaries or executors can choose to cash in the Premium Bonds or transfer them into the names of the beneficiaries. However, NS&I does not allow the direct transfer of Premium Bonds between individuals, so the bonds must be cashed out first and reinvested if desired.
Steps to Claim or Cash Out Premium Bonds After Death:
- Notify NS&I—Contact NS&I’s bereavement team to inform them of the bondholder’s passing. You can do this online, by phone, or by post.
- Provide Documentation – You will typically need a death certificate and proof of your role as executor or administrator of the estate.
- Decide on Next Steps: You can choose whether to keep the bonds in the prize draw for up to 12 months or cash them out once the estate is settled.
- Receive Payment – Once the claim is processed, the funds will be released to the estate or beneficiaries.
What If Premium Bond Winnings Are Unclaimed?
Suppose a deceased person’s Premium Bonds win a prize after passing away but before their estate is settled. In that case, the winnings will be held by NS&I until the legal process is complete. Premium Bond winnings have no time limit, so if you discover that a late relative had bonds, you can still check and claim any past winnings owed to their estate.
💡 Tip: You can use NS&I’s unclaimed assets service to check if a deceased relative had Premium Bonds. Simply provide their details, and NS&I will search their records.
📞 NS&I Bereavement Team Contact: 08085 007 007
Inflation Impact on Premium Bonds
While Premium Bonds offer a secure and risk-free place to store money, they are not immune to the effects of inflation. Understanding how inflation impacts your savings will help you decide whether Premium Bonds are a good long-term investment.
How Inflation Affects Premium Bonds
Inflation refers to the rise in the cost of goods and services over time, which reduces the purchasing power of money. Although the face value of your Premium Bonds remains the same, their real value decreases as inflation rises.
For example:
- If you invested £10,000 in Premium Bonds five years ago and haven’t won any prizes, you still have £10,000 today.
- However, due to inflation, £10,000 can now buy fewer goods and services than five years ago.
Why Inflation Can Be a Problem for Premium Bond Holders
Unlike savings accounts or investments that earn interest or dividends, Premium Bonds do not generate guaranteed returns. This means that unless you win prizes regularly, your money is effectively losing value over time.
Example: Inflation vs. Premium Bonds Returns
- If inflation is 5% per year, your £10,000 loses £500 in purchasing power annually.
- If you win no prizes, your money will not grow enough to keep up with inflation.
- In contrast, a savings account earning 4% interest would at least reduce the impact of inflation.
Strategies to Minimise Inflation Risk
If you are concerned about inflation eroding your savings, consider the following strategies:
✅ Diversify Your Savings – Instead of putting all your money into Premium Bonds, keep a mix of high-interest savings accounts, ISAs, and investments.
✅ Reinvest Winnings – If you win Premium Bond prizes, reinvesting them into other savings or investment options can help maintain purchasing power.
✅ Monitor Interest Rates – If interest rates on savings accounts increase, you may reconsider whether Premium Bonds remain the best choice.
✅ Set Financial Goals – If you need your money to grow over time, an investment such as a Stocks & Shares ISA may offer better long-term returns.
💡 Key Takeaway: Premium Bonds keep your initial investment safe. Still, unless you win prizes consistently, inflation will reduce the actual value of your money. If you are saving for the long term, balance Premium Bonds with other higher-yielding options.
Final Verdict: Should You Get Premium Bonds?
Premium Bonds can be a significant savings tool, but they aren’t suitable for everyone. Whether they’re right for you depends on your financial goals, risk tolerance, and how you feel about the lottery-style prize system.
Premium Bonds Might Be Right for You If:
✅ You want a secure, tax-free savings option. Since Premium Bonds are backed by HM Treasury, your money is safe, and any winnings are tax-free.
✅ You enjoy the excitement of a prize draw. Suppose you like the thrill of potentially winning big prizes while keeping your savings intact. In that case, Premium Bonds can be a fun alternative to traditional savings accounts.
Premium Bonds Might Not Be Right for You If:
❌ You need regular, guaranteed returns – Unlike a savings account that earns steady interest, Premium Bonds offer no guarantees, meaning you could go months or years without winning anything.
❌ You have high-interest debt – If you’re carrying credit card debt or loans with high interest rates, it’s usually better to pay those off before considering Premium Bonds. The cost of interest on debt will likely outweigh any potential prize winnings.
Want to Check Your Potential Winnings?
Before deciding, see how Premium Bonds could work for you. Use the MoneySavingExpert Premium Bonds Calculator to estimate your potential returns based on current prize rates. This tool can help you understand your chances of winning and how Premium Bonds compare to other savings options.
Final Thoughts
Premium Bonds offer a safe and flexible way to save money while allowing you to win tax-free prizes. They are an excellent choice for those who enjoy a bit of excitement in their savings strategy and don’t rely on guaranteed returns. However, suppose you need predictable interest income or want to protect your savings against inflation. In that case, a high-interest savings account or ISA may be better.
💡 Next Steps: If you’re considering investing in Premium Bonds, review your financial goals. Are you looking for fun alongside secure savings, or do you need a more structured approach to growing your money? Make sure to weigh the pros and cons carefully before making your decision.
Would you like help comparing Premium Bonds to other savings options? Drop a comment below, and let’s discuss the best strategy for your financial goals! 🚀
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