Premium Bonds are a savings product by National Savings & Investment (NS&I) - but how they work is very different to a typical savings account.
Instead of getting interest on your money, you're entered into a monthly prize draw where you can win between £25 and £1million - or you may not win anything at all.
Premium Bonds are often described as a “cross between a savings account and the lottery” because of this - and they are hugely popular with savers.
More than 22 million people currently save into Premium Bonds. Here, we explain how they work and what you need to know.
How many Premium Bonds can I buy?
Premium Bonds are offered through NS&I, which is backed by the Government, meaning all your money is safe.
You can buy bonds by setting up an NS&I account online or over the phone by calling 08085 007 007 (+44 1253 832007 if you’re outside the UK).
The minimum purchase amount is £25 and the maximum you can have invested in Premium Bonds is £50,000.
You need to be 16 to make a purchase, although parents and guardians can set up and manage accounts for under-16s.
Each £1 bond you purchase has a chance of winning a prize each month.
How many prizes are up for grabs?
The distribution of prizes changes each month, although two £1million jackpots are always given out.
The next top prize is £100,000, going all the way down to £25 - although again, you may not win anything at all.
The prize money - if you win - is tax-free.
Here is how many prizes were given out this month:
- £1,000,000 - 2
- £100,000 - 63
- £50,000 - 125
- £25,000 - 252
- £10,000 - 627
- £5,000 - 1,257
- £1,000 - 13,361
- £500 - 40,083
- £100 - 1,421,012
- £50 - 1,421,012
- £25 - 2,163,534
Total: £334,047,650
In the June 2023 prize draw, a total of 5,061,328 prizes were paid out and 121,471,874,893 bond numbers were eligible for the draw.
This means 121,466,813,565 bond numbers didn't win a prize - giving you a pretty good idea of your chances of winning each month.
What are the chances of winning?
As you can see above, you've got a much higher chance of getting a smaller prize compared to the £1million jackpot.
But it all depends on how much you have invested - and how lucky you are.
At the moment, the odds of a bond winning each month are 24,000 to 1 for every £1 bond you have invested.
That means for every 24,000 bonds, only one bond will win a prize and 23,999 bonds won’t get anything at all.
The annual prize rate for Premium Bonds is currently 3.3% - but in reality, it isn't as simple as assuming for every £100 you invest, you'll get back £3.30.
This is technically impossible as the minimum prize is £25 - and some people won't even win that.
It is those with the most money invested that have the highest chances of winning - and even then, they'd need to have luck on their side.
How do I know if I have won?
The easiest way to see if you've won is to use the NS&I prize checker online, or the Premium Bonds prize checker app.
If you have an Amazon Alexa, you can ask it to tell you the latest winning numbers.
Customers can choose to have their prizes paid into their bank account, or to have them reinvested into new Premium Bonds.
You should be emailed or sent a text message from NS&I if you've won.
Can I withdraw my money when I want?
Yes, you can cash in all or part of your Premium Bonds at any time.
This is good news for people who may worry about needing access to their cash.
According to NS&I, it takes up to eight working days for your Premium Bond money to reach your bank account.
Which is better - savings accounts or Premium Bonds?
It all depends on how lucky you are - and if you value certainty in terms of returns you'll get, versus the thrill of winning big.
Savings account give you definite returns on your money, based on an advertised rate of interest.
The top-paying easy-access account right now pays 4.25% or you can get up to 5.35% fixed.
If you have Premium Bonds, there is no guarantee you'll win anything at all.
Those who may be more attracted to Premium Bonds include savers who:
- Pay tax on interest and have used up their ISA allowance
- Are in a higher tax bracket
- Have a lot of money to invest, so have more chance of winning
- Are happy with potentially winning nothing at all
If you're unsure and you've got plenty of savings, you could decide to split your money between Premium Bonds and a top-paying savings account.
