Premium Bonds

Premium bonds are backed by the government

Premium bonds are a product offered by the government through NS&I (national savings and investment).

The essence of the product is that you put your money in a savings account and rather than earn interest on the savings account you are placed in a draw to win between £35 and £1million tax-free.

The draws for winning the money take place monthly. Think of this like lottery tickets:

Every £1 you put in the account gives you one ticket (or one bond). The minimum amount of money you can hold in premium bonds is £100 and the maximum is £30,000.

Is my money safe?

Your money is completely safe.

The value of your premium bonds cannot go down and NS&I is backed by the treasury, it is not a bank.

You are, however, giving up guaranteed interest in another savings account for the chance of earning money (by ‘winning’ in the monthly draw).

How likely am I to win with premium bonds?

There is approximately £40billion held in premium bonds with NS&I.

Each month only one prize of £1million is given, this means the odds of you winning a million is approximately 40,000,000,000 to 1 - for each £1 held in bonds, much bigger odds than winning the lottery even.

There are other prizes to be had each month, almost 1.7 million prizes are given out between £25 and £1million, although over 1.6 million of these are £25.

The value of the prizes offered is determined by an interest rate, which has been 1.5% since October 2009.

Odds of 24,000 to 1

NS&I say the odds of winning per £1 unit are 24,000 to 1. Theoretically his means to guarantee winning at least £25 you need to have £24,000 in premium bonds and this would only theoretically guarantee you only £300 a year in ‘winnings’.

Putting £24,000 in an ISA with an interest rate of 3% would earn you £720 a year in interest, also tax-free.

When investing in premium bonds you may not be risking the money you put in but you are risking the interest you could potentially be earning on your money. It is important to remember that due to the nature of the prizes most people will earn less than they could with an ISA or other savings account.

What are the exact premium bond prizes each month?

The following table is correct as of December 2010:

Prize Level
(£)
Number per month
(Winners)
Odds of winning
(Per £1 bond)

£1 million

1

1 in 41,866,498,279

£100,000

4

1 in 10,515,472,726

£50,000

9

1 in 4,673,543,434

£25,000

18

1 in 2,336,771,717

£10,000

42

1 in 1,001,473,593

£5,000

87

1 in 483,470,010

£1,000

1,051

1 in 40,020,828

£500

3,153

1 in 13,340,276

£100

30,895

1 in 1,361,446

£50

30,895

1 in 1,361,446

£25

1,686,424

1 in 24,941

£0

42,060,138,324

1.00004