Premium Bonds explained

How likely are you to win?

People LOVE Premium Bonds because they give you the chance to win cash prizes (up to £1 million) every month. 

But while the thrill of potentially winning a prize can spice up your saving, are Premium Bonds the best way to make the most of your money?

Here’s everything you should know:

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What are Premium Bonds?

Premium Bonds are a very popular type of savings account from National Savings & Investments (NSI) that offer customers the chance of winning cash prizes instead of paying interest. 

Each bond costs £1 although you have to buy a minimum of £25 worth at a time. This gets you 25 entries into each monthly draw. The maximum number of bonds you can have is 50,000 worth £50,000.

Any prizes you win are tax-free and 100% of your money is backed by the Treasury. If you have more money in other NS&I accounts it’ll all be protected – there’s no £85,000 limit as there is with providers covered by the Financial Compensation Services Scheme. And as with savings, your Premium Bonds won’t lose value.

Your money is easy-access so you can cash the bonds in at any time. However, it can take up to eight working days for the money to reach your current account.

Some 24 million people have Premium Bonds (including over 800,000 kids) and they’ve been around since the 1950s. 

The first prize draw was in 1957 and fun fact – the machine used to generate random numbers for the draw (the Electronic Random Number Indicator Equipment, known as ERNIE) was invented by a Bletchley Park codebreaker.

Premium Bond prizes

Right now there are around 5.9 million prizes to win each month ranging from £25 to £1m. 

As you can expect, there are loads more of the lower value prizes compared to the bigger ones. Almost 99% of the total number of prizes are £25, £50 or £100.

There are two £1m prizes to win each month so 24 chances a year to win. But, in reality, it’s very unlikely you’ll win one of these big prizes.

The Premium Bond prize rate can change, and in February 2025 it’s 4% (though it’ll drop to 3.8% from April).

The prize rate doesn’t mean you’ll get a 4% return on your savings. Instead, it suggests an average of £4 is paid out for each bond.

But it’s not as cut and dry as that because there is no £4 prize! Since the minimum is £25, it means not every bond can win each time. There’s no guarantee you’ll win anything and let’s be honest, most bonds don’t. 

To give you an idea of the prizes available, here are all the ones listed for the January 2025 draw and how they compare to previous draws.

How likely am I to win? 

At the moment, the odds of winning a prize are 22,000 to one – so they’re not great.

The more money you have in Premium Bonds, the better your chances of winning. 

Using an online calculator and based on the 4% prize rate from January, here’s what your odds of winning could look like, based on the value of your investment over a year, based on average luck:

Amount in Premium Bonds	What could I win?	Equivalent interest rate
£100	£0	0%
£1,000	£0	0%
£10,000	£325	3.25%
£25,000	£850	3.40%
£50,000	£1,725	3.45%

Based on the chart above, even with average luck, everyone is earning below the prize rate. Of course, a tiny handful will do far better, but what’s more likely, is that most people won’t win anything. 

Around 14.4million people, or two-thirds of Premium Bond holders, have never won a prize with the Premium Bonds, according to a Freedom of Information request made by investment firm AJ Bell. Of the 5.3 million people who did win between June 2023 and May 2024, the average holding was £23,047.

And let’s not forget Andy’s friends’ experience with Premium Bonds. The three of them invested £50,000 in Premium Bonds for a year and had very different results. 

How do Premium Bonds compare with savings accounts?

Following another cut to the Bank of England base rate in November, savings rates are falling. And with further cuts predicted this year, this could continue.

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

But if we look at the top rates of easy access accounts, which are the closest comparable account to Premium Bonds, new customers can quite a bit higher than the Premium Bond prize rate and it’s guaranteed. 

You could also consider a Cash ISA, which often beat the prize rate too, and all your returns will be tax free.

You could get an even higher rate with some restrictions. For example, Santander pays 6% on up to £4,000 on its Edge Saver (you’ll need a Santander current account) while there are regular savers offering up to 8%.

As a general rule when you’re looking at savings rates, if it’s the same or higher than the Premium Bonds prize rate, you’ll probably be better off going with the savings account. However, if they’re variable rates, they could change, so it’s important to keep an eye on your accounts.

Premium Bonds and tax

Any prizes you win are tax-free – and this can be a big draw if you’re someone who’s likely to pay tax on your savings interest or are a higher or additional rate taxpayer. 

If we look at standard savings accounts, though not ISAs, only some of the interest you earn is tax free.

If you’re a basic rate taxpayer you get a £1,000 Personal Savings Allowance each year and if you’re a higher rate taxpayer you get a £500 allowance. Any savings interest above this will be taxed at your usual tax rate. 

Additional rate taxpayers don’t get any tax-free allowance – which means any savings interest you earn will be taxed. It’s why Premium Bonds can be much more appealing to those on higher incomes, especially if they’ve also exceeded their annual ISA allowance.

Should I buy Premium Bonds?

For most people, savings accounts are a better option than Premium Bonds, especially since the prize rate has been cut.

But for the higher earners, they might still hold a bit of allure because of the tax-free prizes.

ISAs should be your first port of call but if you’ve maxed out your £20,000 allowance and you’re likely to pay tax on your savings interest, Premium Bonds might be worth considering.

Or you might like Premium Bonds because of the thrill of potentially winning a million pounds – or other generous prizes. However, while someone has to win it (and they do!) many people never will and you could get absolutely no return on your money for as long as you have the bonds.

Generally speaking, even if you have the maximum £50,000 in Premium Bonds, you’re still far short of the rates of the top easy-access or limited-access accounts.

It’s also not a great idea to have that much money in easy-access accounts anyway. As a rule of thumb, you want to keep between three and six months outgoings in these accounts to make sure you’re covered in case of an emergency. This could include losing your job, replacing the boiler or fixing your car if something goes wrong with it unexpectedly.

Your money’s best placed in an easy-access account or Cash ISA paying a top rate and then you can consider other options depending on how much cash you have and what your goals are.

For example, for long-term saving you may want to consider investing or contributing more to your pension, and making the most of the tax advantages.

How do I buy Premium Bonds?

You have to be over 16 years old to buy Premium Bonds for yourself.

You can get Premium Bonds from the NS&I website. Alternatively you can buy them via the post or by phone.

But if you’re buying Premium Bonds for someone else’s kids, you can’t buy them over the phone, and you won’t be able to buy Premium Bonds for yourself or anybody else by credit card.

When to buy Premium Bonds

The Premium Bond draws take place at the start of each month, but you’re only eligible for each draw on bonds that have been invested for a full month.

This means you’re better off buying them at the end of a calendar month than at any other point.

How will I know if I’ve won a prize?

The quickest way to find out if you’ve won is by entering your account number into the NS&I Premium Bond prize checker or the app version (you can get this on the App store or Google Play). It’ll show you this month’s prizes, anything you’ve won in the previous six months and any older prizes you’ve not claimed yet.

You can also ask Alexa if you’ve won. You’ll need to open the Skill on the Alexa app and follow the steps.