Premium Bonds are one of the UK’s most popular savings products — over 23 million people hold them. But are they actually a good deal? Here is everything you need to know.
What Are Premium Bonds?
Premium Bonds are a savings product issued by National Savings & Investments (NS&I), which is backed by HM Treasury. That means your money is 100% secure — even safer than the £85,000 FSCS protection on bank accounts.
Unlike a normal savings account, Premium Bonds do not pay interest. Instead, each £1 bond is entered into a monthly prize draw, with prizes ranging from £25 to £1,000,000. All prizes are completely tax-free.
Think of it this way: the interest your money would have earned is pooled into a prize fund and distributed as prizes each month.
Key Facts
| Minimum purchase | £25 |
| Maximum holding | £50,000 per person |
| Prize fund rate | 4.00% (as of 2025 — this can change) |
| Prizes | Tax-free |
| Capital security | 100% backed by HM Treasury |
| Access | Withdraw at any time, no penalty |
Prize Tiers
Every month, ERNIE generates the winning bond numbers. The prize breakdown looks like this:
| Prize Amount | Number Awarded Per Month (Approximate) |
|---|---|
| £1,000,000 | 2 |
| £100,000 | 86 |
| £50,000 | 172 |
| £25,000 | 344 |
| £10,000 | 860 |
| £5,000 | 1,721 |
| £1,000 | 17,502 |
| £500 | 52,506 |
| £100 | 1,889,015 |
| £50 | 1,889,015 |
| £25 | 1,181,849 |
Prize numbers are approximate and vary each month based on the total number of bonds in the draw and the prevailing prize fund rate.
Odds of Winning
The odds of any single £1 bond winning a prize in any given month are 1 in 21,000 at the current prize fund rate.
To put that in perspective:
| Holding | Expected Prizes Per Year |
|---|---|
| £100 | ~0.06 (one every 17 years on average) |
| £1,000 | ~0.6 (roughly one per year) |
| £10,000 | ~5.7 (roughly one every couple of months) |
| £25,000 | ~14.3 (roughly one per month) |
| £50,000 | ~28.6 (roughly two or three per month) |
These figures represent statistical averages. In practice, some people win more frequently and others win nothing for long stretches — that is the nature of a random draw.
How ERNIE Works
ERNIE stands for Electronic Random Number Indicator Equipment. It is a truly random number generator — not a pseudo-random algorithm — that uses quantum thermal noise to generate winning bond numbers. Each eligible £1 bond has an equal chance of winning in every monthly draw.
Are Premium Bonds Worth It?
This depends on how much you hold and your tax position.
The Prize Fund Rate vs Reality
The 4.00% prize fund rate means NS&I allocates 4.00% annually of the total bond fund as prizes. However, because prizes are heavily skewed towards the two £1,000,000 jackpots and other large amounts, most individual bondholders receive less than the headline rate.
The median return — what a typical bondholder actually receives — is lower than 4.00%, especially for small holdings.
Small Holdings (Under £1,000)
With a small number of bonds, you are likely to win nothing in most months and perhaps one or two £25 prizes per year at best. Your effective return could easily be below 1%. You would almost certainly earn more in a straightforward easy-access savings account.
Larger Holdings (£10,000–£50,000)
With a larger holding, the law of averages works more in your favour. You are likely to receive regular £25 and £50 prizes, with occasional larger amounts. Your effective return will typically come closer to (but still slightly below) the 4.00% prize fund rate.
Tax Advantage
Premium Bond prizes are entirely tax-free. For a basic-rate taxpayer, this matters less — you already get a £1,000 Personal Savings Allowance (PSA) for tax-free interest. But for higher-rate taxpayers (£500 PSA) and additional-rate taxpayers (£0 PSA), the tax-free status of Premium Bonds becomes genuinely valuable.
For a higher-rate taxpayer who has used their PSA, a 4.00% tax-free return is equivalent to a 6.67% gross return on a taxable savings account. That is hard to beat.
How to Buy Premium Bonds
You can purchase Premium Bonds through:
- The NS&I website at nsandi.com
- The NS&I app
- By phone (08085 007 007)
- By post
- By setting up a standing order for regular purchases
Purchased bonds are entered into the prize draw after they have been held for one full calendar month.
How to Check if You Have Won
- NS&I app — results updated on the first working day of each month.
- NS&I website — use the prize checker tool.
- Alexa — ask “Alexa, have my Premium Bonds won?”
- Email or text alerts — sign up through your NS&I account to receive automatic notifications.
Unclaimed Prizes
There is currently over £84 million in unclaimed Premium Bond prizes. If you or someone in your family has held Premium Bonds at any point, it is well worth checking — prizes do not expire.
Useful Links
- ISA Calculator — compare Premium Bonds with a tax-free ISA.
- Compound Interest Calculator — see how your savings could grow in a standard account instead.
- Savings Guide — a broader look at where to keep your money.