Money

how to buy them and chances of winning

Published

3 days ago

September 16, 2024

Strictly speaking, Premium Bonds are not savings products, as they don’t pay interest. Instead, each £1 invested buys a unique bond number, which is entered into a monthly prize draw.

You can hold between £25 and £50,000 of Premium Bonds, meaning each person can have up to 50,000 numbers have the chance of being picked for a prize each month.

A machine nicknamed “Ernie” (which stands for “Electronic Random Number Indicator Equipment”) randomly selects winners, who can receive from £25 to £1m – but there are only two £1m prize winners each month.

You can earn far higher rates from fixed-rate bonds offered by banks and building societies if you are prepared to lock your money up for a year or more – you can find the current best rates in our savings guide.

On the other hand, you could eclipse any interest you could possibly earn with a savings account by winning a valuable prize (but the odds are you probably won’t).

You can buy premium bonds in three ways:

Online at nsandi.com,
Over the phone (freephone 08085 007 007)
By completing an application form and posting to: National Savings and Investments, Glasgow G58 1SB.

You must be 16 or over to buy Premium Bonds.

It is also possible to set up your account so that prizes are automatically reinvested in new bonds. As with other types of investment, this allows your money to benefit from compounding interest.

If you don’t want to reinvest the prizes, you can get them directed to your desired bank account.

The odds of any Premium Bonds winning a prize in a monthly prize draw is one in 21,000.

Your chances of winning a prize depend on NS&I’s “prize fund rate” and the amount you’ve invested.

The higher the prize fund rate, the more prizes NS&I will be handing out in each draw. The more you’ve invested, the more likely it is that at least one of your bond numbers will be picked.

Your odds of winning a prize are determined by the prize fund rate, which is currently set at 4.4pc. This is the average percentage growth of all Premium Bonds investors, taking in the few people who win the £1m jackpot and the thousands of people who win nothing at all.

NS&I sets the prize fund rate according to its funding target set by the Government; in years where it’s tasked with bringing in more money, it will set a higher prize fund rate to encourage savers to invest. In times where the target is lower, it may reduce the number of prizes on offer.

What’s happening in the wider savings market can also have an impact. During the pandemic, when the Bank of England set the Bank Rate at an historic low, most savings providers followed suit with rock-bottom account rates. As a result, many savers turned to Premium Bonds as a better bet to make a return on their cash.

In this year’s Budget, NS&I was tasked with raising £9bn – down from £10.9bn in 2023-24. It has flexibility to raise £4bn above or below this figure. This includes deposits for Premium Bonds and most other NS&I savings accounts, excluding its Green Savings Bonds. As it needs to raise less money than it did last year, it could indicate Premium Bonds odds will get worse.

Nearly 6 million prizes were handed out in the most recent Premium Bonds prize draw. This included two £1m jackpot prizes, 87 prizes for £100,000, and many others for £50,000, £25,000, £10,000, £5,000, £1,000, £500, £100, £50 and £25.

Children under 16 can hold bonds, but their accounts must be controlled by a parent or guardian. Once they turn 16, they can take control.

Anyone can buy Premium Bonds for a child – like adults, they can hold up to £50,000 and they could also win up to £1m.

The bonds are a family-favourite product, with millions invested on behalf of children.

However, this option does come with the same issue that if the child’s Premium Bond numbers aren’t picked for a prize their money will lose value over time. Before you start saving, it’s best to weigh up all of the options for saving for children.

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