Are premium bonds worth a punt?

All you need to know about these government prizes

1. Premium Bonds are run by National Savings & Investments, which is the government’s own savings bank. Unlike other NS&I products, Premium Bonds are not savings accounts: you do not get a stated rate of interest.

2. They are hugely popular: 22 million Britons hold more than £68 billion in them.

3. The bonds are entered in a monthly draw with prizes ranging from £25 to £1 million. But you may not win anything at all. If you do win, prizes are free from tax. The numbers are selected by ERNIE – a random number selector.

4. Unlike the lottery, Premium Bond prizes are always claimable: there are some waiting to be claimed from many years ago. You can check if you’ve got an unclaimed prize on the NS&I website here.

5. Are there any risks? Premium Bonds are different from other games of chance because you can always get your stake back. But, if you don't win, you still risk losing out because that money would've earned interest somewhere else. Also, inflation will eat into the value of your original stake if you don't get any prizes to compensate.

6. You can invest from £100 up to £50,000 in Premium Bonds. Children can hold them too as long as they are bought for them by a parent, guardian, grand or great-grandparent.

7. So what are the chances of winning? Fairly remote, actually. The chance of any one bond (they are denominated in £1 amounts) winning a £25 prize is one in 30,000. For winning one of the two £1 million monthly jackpots, it’s one in 34.3 billion. 

8. While there isn’t an interest rate on Premium Bonds, there is what’s called the 'return on the prize fund'. This is currently 1.15%, which means, in practice, that if you hold £50,000 of bonds you might expect to win about £500 in prize money a year. But then, you might win absolutely nothing at all (or a lot more, if you’re lucky).

9. Premium bonds are sold online, by post and on the phone. You have to hold them for a full calendar month before they go into a month’s draw – so if you bought them on 10 May the first draw they would go into would be in July.

10. You can take your money out of Premium Bonds whenever you like. Because of this flexibility, and the 100% safety of your stake, they can be useful for holding money for future events where you can’t risk the chance of losing money, such as the proceeds of property sales and similar.


More stuff:

  • See Money Saving Expert here for an in-depth examination on the probability of winning on Premium Bonds.
  • Apply for Premium Bonds here and get all the official information.
  • For alternatives to Premium Bonds, see the SMM guide to saving for children here.


Last updated: 29 September 2017.