Premium Bond Certificate from National Savings

What are National Savings premium bonds? How do they work and will they make you money? They’ve lost their main tax advantage, but can still have a place. Here’s what you need to know.

What are National Savings Premium Bonds?

In a nutshell:

  • Set up in 1956 by the UK government to encourage people to save
  • NS&I (National Savings and Investments) is the government agency who administer them
  • The government pays an annual prize rate (kind of like an interest rate) on the bonds that is currently 1.4%. This then goes into a monthly prize draw fund. It’s really only an average payout, so beware that it’s just a guide and in no way guaranteed.
  • Winners are drawn monthly on the first day of the month
  • ERNIE (Electronic Random Number Indicator Equipment) is the catchy name of the draw machine (or is he the fastest milkman in West?)
  • If you win, you can choose to automatically re-invest or have the winnings paid into your bank account

What do I need to know about National Savings Premium Bonds?

Your seven need-to-knows:

  1. £1 buys you one bond
  2. Minimum investment? £25
  3. Maximum investment? £50,000 per individual
  4. Age limit: 16
  5. Prize range? Anything from £25 to £1,000,000
  6. Odds of winning? About 1 in 24,500. D’ya feel lucky, punk?
  7. All prizes are tax-free (this is not the benefit it used to be since 2016)

How do I invest?

The easiest way to buy National Savings Premium Bonds is online (although you can still call up or post investments in).

A Premium Bonds account can be easily set up in just a few minutes, via the National Savings and Investments website. You can easily log in to buy more or set up a standing order.

Can I buy National Savings Premium Bonds via Direct Debit?

Gold and black NS&I Premium Bonds logo
NS&I: the Government agency that administer Premium Bonds

Currently, there is no way to set up a direct debit online. Given the idea is to encourage people to save, it’s not clear why.

If you want to pay in money each month, you’ll need to set up a standing order with your bank.

The online portal is simple to use and NS&I offer other products to invest in which can be managed under the same interface.

When are they drawn?

Crucially, only when Bonds have been held for one full calendar month are they entered into the draw.

For example, you buy Bonds on the 15th January. However, they won’t qualify for a draw until the 1st of March.

Remember to set up your standing order for a few days before the end of the month, so that your money gets entered into the nearest draw.

What are the chances of winning?

The odds of winning anything is 1 in 24,500. Sounds like a long shot? Well, that’s because it is. For perspective, think about your average working day: the chance of winning is like picking 1 specific second in a 7-hour period!

By comparison, the chance of getting 4 numbers on the National Lottery is 1 in 2,180.

Feel a group syndicate coming on? Well, hold on, because there are a few key differences here:

  1. If you lose on the National Lottery you lose your stake (£2 per throw of the dice). By contrast, you are guaranteed to keep your original investment with Premium Bonds and enter in the next monthly draw.
  2. When playing the Lottery, your chosen numbers are not unique, As a result, you might end up sharing the prize money with someone else. For example, in January 1995, 133 winners shared the jackpot netting a measly £122,510 each. Considering they thought they’d be millionaires, that’s pretty disappointing.
  3. The winnings on the National Lottery are not capped at £1,000,000. In fact, the prize has reached £66 million! To stop excessive rollovers, in 2016 a threshold was introduced.
  4. The chance of winning the National Lottery jackpot is 1 in 45 Million. Compare that to 1 in 36 Billion for Premium Bonds. Yes, that’s right…..Billion!

Finally, the amount you have invested in National Savings Premium bonds also greatly increases your chances of winning, as every £1 = 1 chance.

Premium Bonds odds calculator

Martin Lewis’ team have created an awesome calculator where you can check the likelihood of winning with Premium Bonds.

To make life easy, we’ve summarised the summary table below:

1 Year2 Years5 Years

As you can see, the returns are not exactly exciting and remember, these returns are not guaranteed. Whilst they have the potential to make more than what the table suggests, winning nothing is also a strong (and the most likely) possibility!

Why not invest in Premium Bonds?

In short, they don’t offer the tax advantages they used to.

The introduction of the Personal Tax Allowance in 2016 means that interest from savings is automatically paid tax-free until you earn over £1,000 in interest. In reality, this means that 95% of people no longer pay tax on their savings.

As a result, Premium Bonds have now lost their key advantage for most people.

What are the advantages of Premium Bonds?

We’re always looking for the silver lining, but even this is wearing thin:

  • Your cash is protected by the government and never at risk. That said, practically all UK savings are protected anyway
  • Pay no tax on any winnings (if you earn over £1,000 of interest from savings and are in the 5% of people this still applies to)
  • You have a chance to win something – which is exciting, we guess (albeit a measly 1 in 36,000,000,000 of winning £1m)
  • Withdraw your money at any time, penalty free

Are National Savings Premium Bonds worth it?

In a nutshell, for the vast majority of people, even a high-interest savings account or cash ISA would be a better place to stash your cash. The benefit of both of these is that they guarantee a return, as well as protect your original cash value.

If you, however, you are already earning over £1,000 in interest from savings, want a bet where you lose your original stake and need to access your money penalty free at any time, then perhaps they have their place.

Finally, it’s important to remember that while your cash might not lose value in Premium Bonds below your original investment, it is unlikely to keep up with inflation. Therefore, it’s spending power over time will be reduced – £1 today buys a lot less than £1 ten years ago.

Premium Bonds benefits are not what they were. But if you fall within a very specific category, they may have their place. Even then, however, we can think of investment options that are far more likely to outperform Premium Bonds in the long term. If you do go for it, then the best of luck to you. We’d love to hear how you get on. does not offer financial advice and is intended for reference/information only. Remember, you should always carry out your own research and/or take specific professional advice before choosing any financial products or services or undertaking any business or financial venture. Investments may go up as well as down and you may get back less than you put in.

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Premium bonds: will they make you rich?