What are Premium Bonds?

What are Premium Bonds?
Photo by Nick Fewings / Unsplash

Premium Bonds are a type of savings product issued by the UK government through the National Savings and Investments agency (NS&I). Instead of paying interest, Premium Bonds enter the holder into a monthly prize draw where they have the chance to win tax-free prizes. The prizes range from £25 to a £1 million jackpot.

Here's a more detailed breakdown:

1. How They Work:

  • Purchase: You can buy Premium Bonds in units of £25, and the maximum amount you can hold is £50,000.
  • Prize Draw: Each £1 Bond number has an equal chance of winning, and the numbers are drawn using a random number generator named ERNIE.
  • Tax-Free: All prizes are tax-free in the UK.

2. Returns:

  • Interest Rate Equivalent: The prize fund interest rate is 4.65%.
  • Luck-Based: Your return depends on luck rather than a fixed interest rate.

3. Safety:

  • Premium Bonds are backed by the UK government, making them a very safe investment.

4. Accessibility:

  • Cashing In: You can cash in your bonds at any time without penalty.
  • Online Management: You can buy, manage, and cash in your Premium Bonds online.

5. Who They're Best For:

  • People looking for a safe place to store money.
  • Those who are interested in the potential of winning tax-free prizes.
  • Individuals who have already maxed out their ISA allowance (another tax-efficient savings option in the UK) and are looking for other tax-free savings options.

6. Considerations:

  • Inflation Risk: Because the returns are not guaranteed, there's a risk that inflation could erode the value of your investment over time if you don’t win enough (or any) prizes.
  • Opportunity Cost: You might be able to earn a higher return on your investment with other savings or investment products.

Premium Bonds can be a fun and exciting way to save money, but it’s important to understand that they may not be the best option for everyone, especially if you are relying on your savings to generate a steady income or grow reliably over time.



  1. Visit the NS&I Website: Click HERE.
  2. Create an Account or Log In: If you do not already have an NS&I account, you will need to create one. If you do have an account, simply log in.
  3. Select Premium Bonds: Find Premium Bonds in the list of available products and select it.
  4. Enter Purchase Details: Input the amount you wish to invest. The minimum purchase amount is £25, and the maximum is £50,000 per person.
  5. Payment: Provide your debit card details to make the purchase.

By Phone:

Call NS&I:  0808 5007 007

  1. Provide Details: You will need to provide personal details, as well as the amount you wish to invest.
  2. Payment: Provide your debit card details to make the purchase.

By Post:

  1. Download and Complete the Application Form: The form can be downloaded from the NS&I website.
  2. Mail the Form: Send the completed form along with a cheque for your investment amount to the address provided on the form.

For Children:

  • If you’re buying Premium Bonds for a child, you will need to provide the child’s details as well as your own.
  • You can buy online, by phone, or by post.

Things to Consider:

  • Eligibility: You must be at least 16 years old to purchase Premium Bonds.
  • Investment Limit: There is a maximum limit of £50,000 per person.
  • Prizes: Premium Bonds do not earn interest. Instead, they enter a monthly prize draw with the chance to win tax-free prizes ranging from £25 to £1 million.
  • Access to Money: Your money is not tied up and can be withdrawn at any time, but you will not earn any interest on your investment.

After Purchase:

  • Bond Numbers: You will be issued a unique bond number for every £1 you invest.


The odds of any single £1 Premium Bond winning a prize in a monthly draw were last measured at 21,000 to 1.

However, these odds can change, as they are reviewed periodically by National Savings and Investments (NS&I), the government department that offers Premium Bonds.

The prizes for Premium Bonds range from £25 to £1 million, and the odds of winning a prize of any amount are the same regardless of the value of the prize. However, the odds of winning a larger prize are much lower than the odds of winning a smaller prize.

To increase your chances of winning a prize, you would need to purchase more Premium Bonds. However, it's important to note that investing in Premium Bonds is a form of gambling, and there is no guarantee that you will win a prize, regardless of how many bonds you purchase.

If you're considering investing in Premium Bonds or any other form of gambling, it's important to do so responsibly and to be aware of the risks involved.


The prize amounts for Premium Bonds can vary significantly, and they range from £25 to £1 million.

  • £25
  • £50 (or £100 with the 2x Winnings feature)
  • £500
  • £1,000
  • £5,000
  • £10,000
  • £25,000
  • £50,000
  • £100,000
  • £1,000,000


Here’s how you can check if you've won a prize in a Premium Bonds draw:


  1. NS&I Website: Go to the official NS&I website and use the
    prize checker tool
  2. You’ll need your Premium Bonds holder’s number, which you can find on your Bond record or by logging into your account.

NS&I App:

  1. Download the App: Download the official NS&I app from the App Store or Google Play.
    • Log in with your details and use the prize checker feature.

Amazon Alexa:

  1. Enable the Skill: If you have an Amazon Alexa device, you can enable the NS&I Prize Checker skill.
    • You can then ask Alexa if you’ve won a prize.

By Post:

  1. If you have chosen to receive prizes by post, you’ll receive a warrant (like a cheque) and a prize advice slip.

By Bank Transfer:

  1. If you have chosen to have prizes paid directly into your bank account, you’ll receive the money directly, and a notification will be sent to you.

By Phone:

  1. You can also call NS&I’s customer helpline to check for prizes. Be sure to have your holder’s number and personal details ready for verification.

Unclaimed Prizes:

  • If you think you might have unclaimed prizes, you can use NS&I’s tracing service or the My Lost Account website to search for them.

By following these steps, you should be able to check if you’ve won a prize in the Premium Bonds monthly draw. Remember that even if you don’t win, your money is safe and you can withdraw it at any time.


Premium Bonds are a type of lottery bond in the United Kingdom, and they have unique tax treatment.

The winnings from Premium Bonds are tax-free in the UK. This means that any prizes you win, regardless of the amount, are not subject to Income Tax or Capital Gains Tax. However, if you give your prize money to someone else, and you die within seven years, it could be subject to Inheritance Tax.

It's also worth noting that the interest that the bonds accrue to fund the prize pool is paid gross before any tax is deducted. This makes them a particularly attractive investment for UK taxpayers, especially higher and additional rate taxpayers.

If you're a resident in another country, the tax treatment of Premium Bonds winnings can be different, and it's advisable to consult a tax professional or the relevant tax authorities in your country of residence to understand how these winnings would be taxed.

Please keep in mind that tax laws can change, and it's always a good idea to consult with a tax professional or the HM Revenue & Customs for the most current information.


When you pass away, your Premium Bonds are treated like any other part of your estate. Here is a general guide on what usually happens, but it is important to note that this information could be subject to change, and you should check with National Savings & Investments (NS&I) or a legal professional to get the most accurate and up-to-date advice:

  1. Notification: NS&I needs to be informed of your death, click HERE to learn more. This can be done by a relative, friend, executor of the will, or a legal professional. They will need to provide a copy of the death certificate and any other required legal documents.
  2. Claims Process: NS&I has a specific process for handling the Premium Bonds of a deceased person. The executor or administrator of the estate will need to complete a claims form and send it to NS&I.
  3. Prizes: Your Premium Bonds remain eligible for the prize draw for 12 months following your death. Any prizes won during this period will be paid to your estate.
  4. Repayment or Transfer: The executor or administrator can choose to either have the value of the bonds repaid or, in some cases, transferred to a beneficiary. If repayment is chosen, the value of the bonds at the time of death will be paid out.
  5. Tax: Inheritance tax may be payable on your estate, including the value of your Premium Bonds, depending on the total value of your estate and the prevailing tax laws at the time of your death.
  6. Time Limit: There is no time limit for claiming Premium Bonds after a holder’s death.

It is a good idea to keep your Premium Bonds records up to date and inform a trusted family member or friend about them to make the process smoother in the event of your death. Additionally, consulting with a legal professional can help ensure that all necessary steps are taken according to the current laws and regulations.

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