Premium bonds: what are they and are they worth buying?

Premium bonds offer both novice and experienced investors the security of a government-backed savings account, with the chance to win up to £1 million each month. 

We explore how premium bonds work and whether you should buy any.

What are premium bonds? 

Premium bonds are a savings account issued by National Savings & Investments (NS&I) on behalf of the UK government.

Instead of earning interest, you are entered into a random draw to win up to £1 million in cash. 

The first premium bonds were sold on 1 November 1956. The government used the sale of these premium bonds to raise funds,receiving £5 million in investments in the first month.  

Premium bonds offer a risk-free method of saving, with the potential of winning a monthly prize of between £25 and £1 million.

However, bear in mind there is a chance you will receive no return on your investment.

How do premium bonds work? 

Premium bonds work similarly to a lottery. Each premium bond is worth £1, and you must spend at least £25.

With every bond you have, your chances of winning increase (and you can pay in up to £50,000).

How do I buy premium bonds? 

All premium bonds are issued by the government and can be purchased online, over the phone, or by filling out a paper application and sending it by post.

You can apply via the NS&I website here and pay in up to £50,000.

Gifting premium bonds is possible and can be an alternative to cash if you want to treat your loved ones. If you’re buying premium bonds for someone else, this can be done online or by post.

Gifting premium bonds to your own child can be done online, by phone, or by post.

If you are gifting premium bonds to someone else’s child, you must nominate a parent or guardian to manage the account until the child is 16.

How much are premium bonds? 

The minimum amount you can invest in premium bonds is £25 and the maximum is £50,000. There are no handling or start-up fees, or minimum or maximum time limits.

The important thing to remember with premium bonds is that the amount you invest determines your chances of winning.

What are the chances of winning premium bonds? 

The annual prize fund rate is 3.6% at the time of writing. This means that every year, £3.60 worth of prizes are awarded for every £100 invested, with a prize draw occurring once a month.

For every £1 you hold in premium bonds, your chances of winning are 22,000 to one, so it really is the luck of the draw.

Some people might hit the jackpot and win a large prize early on; others may invest and wait many months for a small return, although this is not guaranteed.

You could walk away with nothing at all, whereas if you had put your money in a standard savings account, you would have earned some interest.

NS&I pays out millions of prizes each month, so as the old adage goes, ‘you’ve got to be in it to win it!’

What are the prize amounts for premium bonds? 

Around six million prizes worth over £396 million were paid out in the August 2025 prize draw.

The prizes are banded into higher value (£5,000 to £1 million), medium value (between £500 and £1,000) and lower value prizes (£25, £50 and £100).

Winners are notified by text or email, or for speed you could use the prize checker on the Premium Bonds app which tells you if you’ve won anything in the previous six draws and if you have any older unclaimed prizes.

If you win the £1 million prize, someone named Agent Million will visit you personally to give you the good news.

There’s also no time limit for claiming your premium bond prize.

When are premium bonds drawn? 

Premium bonds are drawn on the first working day of each month.

How are premium bonds numbers drawn?

NS&I uses a random number generator, Electronic Random Number Indicator Equipment,  nicknamed ERNIE, to pick the prize winners.

The latest ERNIE uses quantum technology and light to randomly select winners each month.

How do you check premium bonds? 

As mentioned, once you’ve bought those precious premium bonds, you can be notified by text or email if you have won.

You can also download the premium bonds app to keep track of winnings, or even add a skill to your Alexa.

If you do win, there are several ways to cash in your premium bonds.

Prizes can be paid into a UK bank account or you can choose to reinvest, putting your winnings back into premium bonds.

To cash in your premium bonds, you'll needyour holder's number and bank account details.

How long does it take to withdraw premium bonds? 

Most prizes are paid out within seven working days; however, if you opt to receive your prize as a cheque via post, this may take a little longer.

You can also opt to cash in your current premium bonds at any point and it takes approximately three working days. NS&I has a helpful calculator which lets you know when the money should hit your bank account.

There are no penalties for withdrawing your money, unlike some types of savings account. 

Are premium bonds safe? 

In terms of risk, premium bonds are one of the safest forms of savings around.

Premium bonds are backed, or underwritten by HM Treasury so you should have no worries about losing your money.

Invest in a business or commodity through stocks and shares and you may make a higher return, but you also risk losing money.

You will never lose your investment with premium bonds. 

Do I need to declare earnings from premium bonds? 

Premium bonds are tax-free and do not have to be included in your tax return. 

This is the same for most UK savings options, such as tax-free individual savings accounts (ISAs), and there are no rules against taking out multiple products.

However, you may need to pay tax on some savings accounts if you exceed the personal savings allowance.

You can read our advice on other cash savings options here.

Can you inherit premium bonds? 

Although premium bonds themselves are tax-free, you cannot inherit them directly, although their value can become part of your estate to be shared out as inheritance.

Depending on the amount invested, it is a relatively straight forward process for family or executors to withdraw the funds. 

What happens to premium bonds when you die? 

As previously stated, you can’t inherit premium bonds; however the money can be withdrawn and then reinvested if you wish.

When a loved one dies, finances are the last thing you should need to worry about.

If the value of the premium bonds is small and you have the premium bonds account details, you may be able to withdraw the money online. 

If it’s a bigger holding, you may need to supply a grant of representation (proof of probate) to NS&I.

NS&I does reserve the right to request this for any amount, but it’s more likely for amounts over £5,000. 

Get expert financial advice 

Premium bonds offer a unique savings opportunity with the potential for substantial rewards, though without guaranteed returns.

Their appeal lies in their government-backed security and monthly prize draws, making them an attractive option if you enjoy the thrill of chance.

While they don't provide regular interest or guaranteed returns, the tax-free nature and safety of premium bonds can be appealing if you are a conservative investor.

However, as with all investments, it's important to consider your financial goals and whether the lottery-style nature of premium bonds aligns with your savings strategy.

Let Unbiased quickly match you with a financial adviser for expert advice on whether premium bonds fit your overall financial strategy and explore other savings options that might better meet your goals.

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