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More than 22 million people – nearly a third of the UK population – hold Premium Bonds, and they’ve been around for more than six decades.
They have always been a big hit with older people, who often buy them as part of their own savings strategy or as a gift for children or grandchildren (although the latter is not necessarily the best approach). According to National Savings and Investments (NS&I, the body that runs the scheme), the average age of a Premium Bond holder is 53.
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Premium Bonds are different to other savings accounts on the market, in that they don’t offer interest. Instead they offer the chance to ‘win’.
Savers can buy in with a minimum investment of £25, up to a maximum of £50,000. Instead of getting a guaranteed return, each £1 bond is entered into a monthly prize draw with the chance to win tax-free prizes ranging from £25 to £1 million.
The number of prizes available changes over time, based on NS&I’s ‘prize fund rate’, which changes to reflect things like movement in the Bank of England base rate or the savings market.
The prize rate will not look that different to the rate you can expect on a typical savings account.
But this doesn’t mean you’ll get prizes equivalent to that rate. Instead, it refers to the ‘mean’ average return for the typical bond holder.
As of January 2026, the prize rate is 3.6%. That means that for every £100 invested, NS&I will pay out £3.60 in prizes. But how much you might win – or whether you win anything at all – comes down to luck.
Laura Suter, personal finance expert at AJ Bell, explains: “The Premium Bond ‘prize fund rate’ is intended to give savers some idea of how the account compares to normal savings accounts.
“But it is the average return you would get based on having ‘average luck’ in the prize draw.
“Clearly not everyone has ‘average’ luck, otherwise the prizes would be handed out equally to every saver.
“The fact that there are some very large prizes also skews the figures – as it means that for every person who wins £1m or £100,000, there will be hundreds who win nothing.”
So while some lucky winners will earn more than the prize rate, the majority will win less.
According to NS&I, the odds of winning any prize each month are 22,000 to 1 for every £1 bond. Each bond has an equal chance of winning, so the more bonds you hold, the better your chances – but there aren’t any guarantees.
The chances of winning big are much smaller. Kevin Mountford, co-founder of Raisin UK, says: “The odds of winning with Premium Bonds can be somewhat confusing. The widely cited 22,000 to 1 refers to the chance of winning any prize, but the likelihood of hitting a larger, life-changing amount is much slimmer.”
Each month, two bondholders will win £1 million, but most prizes are much smaller, highlights Sarah Pennells, consumer finance specialist at Royal London.
“There’s a lot of maths that goes into working out how the prize money is split. Prizes are divided into higher, medium and lower value bands. 10% of the prize fund goes to prizes above £5,000 (higher value), another 10% to prizes worth between £500 and £1,000 (medium value) and 80% to the lower value prizes of £25 to £100.”
If you don't win any money on your Premium Bonds, the real value of your savings will diminish over time.
This is because your money isn’t going to be keeping up with inflation – unlike with savings accounts that pay interest.
Get talking to people about Premium Bonds and you might find that some people say that newer bonds are ‘luckier’ than older ones.
In fact, such is the belief that older bonds are less likely to win, NS&I had to issue a response, explaining why newer bonds are getting a larger majority of the prizes.
According to the savings institution, the reason that newer bonds are more likely to win is, despite being on offer since 1957, 97% of Premium Bonds have been bought since the year 2000 – so there are a lot more newer bonds in the draw each month, meaning there’s a greater chance they’ll win.
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Unlike savings accounts, Premium Bonds are backed by the Treasury. That security could be another reason why they’re so popular.
But your money is already safe in most UK bank or saving accounts, as long as they have FSCS protection. This covers up to £120,000 of money per person, per authorised firm.
Despite this, Suter says that saving with the NS&I is still sometimes perceived as a ‘safer’ option. “Because NS&I is run by the government it can’t go out of business, whereas a bank could go bust and then you’d have to reclaim your money through the compensation scheme.
“It’s a marginal difference but some people [may] feel much safer with their savings being with the government,” she adds.
If you have a lot of other savings held with NS&I as well as Premium Bonds, then the Treasury protection may be more useful to you since unlike the FSCS scheme, there's no upper limit.
You may have heard of ‘Agent Million’ and wondered who they are. They’re one of five anonymous members of NS&I staff tasked with visiting winners of the £1 million jackpot in person.
Smaller prize winners don’t get a knock on their door – instead, they’ll be notified by email or text message that they’ve won and the money will either be paid directly into a bank account or reinvested in more bonds (depending on what’s been selected).
The email or text won’t explain how much has been won – that's done either through the app or online using the Premium Bond Prize Checker.
The winners are picked on the first working day of the month. Bonds are not eligible for the draw unless they’ve been invested for a full month. So if you’re moving money from savings that might be earning some interest, you maximise your money if you buy Premium Bonds towards the end of the month rather than near the beginning. And when withdrawing, it’s better to do so just after a draw rather than just before.
When you were younger, you may have heard about ERNIE (Electronic Random Number Indicator Equipment) – a computing system that was designed to deliver truly random numbers, when the prize winners are drawn on the first working day of each month.
In 2019 the latest iteration of this machine came into service – ERNIE 5 – to speed up the process once again.
Whereas ERNIE 1 to 4 relied on a system of listening to the sound of hissing gas to draw random numbers, the latest model uses quantum technology by firing light at a semi-transparent mirror to create a random list.
These results are then checked against eligible numbers (as some bonds will have been withdrawn) before creating the final list of winners which are sent to a government department for auditing.
The increase in speed from using quantum technology means the millions of numbers needed for each draw can be generated in around 20 minutes. The original, then-groundbreaking, technology from the 1950s would have taken more than 200 days to generate the numbers needed today.
Premium Bonds themselves cannot be left to someone else in a will. Instead, they’ll be cashed in by the executor of the estate and then the proceeds will be given to its beneficiaries for them to spend or save as they see fit.
If they’re worth over £5,000, a Grant of Representation (also known as a Grant of Probate or Grant of Letters of Administration) will need to be sent if requested by NS&I.
Alternatively, the bonds can be held for up to 12 months before cashing out, so they’ll stay in the prize draw to potentially gain money for the beneficiary, before the executor of the estate can withdraw the bonds and pass on the value to the named person.
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