Rock-bottom savings rates prompted large numbers of people to pile into Premium Bonds in recent years, but with savings returns now rising, are bonds still a good bet?

Since the first draw in June 1957, 559m Premium Bond prizes with a total value of £22.8 billion have been drawn.

A staggering £117billion is currently invested in NS&I Premium Bonds by more than 21m people – equivalent to a third of the UK population. It’s not hard to see their appeal, as they currently offer bondholders the chance to scoop one of two £1m jackpots every month, along with numerous other tax-free prizes.

The bonds currently offer a prize-fund equivalent of an interest rate of 1% a year and each bond has a one in 34,500 chance of winning a prize. The prize fund rate and the odds of winning are variable, so they can change from time to time. For example, in 2020, each bond had a one in 24,500 chance of winning a prize. The Premium Bond prize fund rate will increase to 1.4% from June 2022.

How savings accounts compare

For someone with ‘average’ luck, Premium Bonds offer potentially higher returns than most savings accounts, but the gap is narrowing.

According to financial website, the average easy access savings account rate currently stands at just 0.33%, with the top account paying just 1.05%.

Here, we explained how Premium Bonds work, what your chances of winning a prize are, and how they stack up against savings accounts.

How do Premium Bonds work?

Premium Bonds are offered by NS&I which is backed by the government, meaning they are 100% secure. The minimum amount you can invest in Premium Bonds is £25 and the maximum is £50,000.

You won’t earn any interest on any money held in Premium Bonds, but your bonds will be entered into a prize draw each month where you could win one of two £1m prizes, or smaller cash prizes ranging from £25 to £100,000.

You can buy Premium Bonds on behalf of children or grandchildren up to the age of 16 and you can cash in your bonds whenever you want.

How do you buy Premium Bonds?

You can buy Premium Bonds online at NS&I by debit card (you can’t pay for them using a credit card) here. Alternatively, you can buy them by post. If you apply by post, you must first download an application form from the website. There is also a telephone number for NS& which is 08085 007 007.

Do I have to pay tax on any winnings?

No, any winnings from Premium Bonds are completely tax-free.

Similarly, most people who put money into a savings account don’t usually pay tax on the interest they earn unless they have a very high balance. That’s because the Personal Savings Allowance currently enables you to earn up to £1,000 in interest a year from your savings without having to pay tax on it. If you’re a higher rate taxpayer, the Personal Savings Allowance falls to £500 and additional rate taxpayers paying the top rate of income tax don’t get a Personal Savings Allowance.

By way of example, a basic-rate taxpayer with savings in an account paying 1% would only go over the annual £1,000 Personal Savings Allowance limit if they had more than £100,000 in savings. Higher rate taxpayers would need to have more than £50,000 earning 1% interest to reach the £500 Personal Savings Allowance.

You can also consider keeping your cash savings in a cash individual savings account (ISA) where you don’t have to pay any tax on the interest you receive. Find out more about cash ISAs in our article How cash ISAs work and you can see which cash ISAs currently pay the highest rates in our guide Best cash ISA rates – which cash ISAs pay the most interest?.

How will I be told about any Premium Bond prizes I win?

If you’re lucky enough to be a £1m Premium Bond jackpot winner, usually you’ll be visited in person by a representative of NS&I called ‘Agent Million’.

If you win a smaller prize, you’ll either be notified by text, email or post. A spokesman for NS&I said: “Customers who have chosen to have prizes paid to their bank account, or have their prizes reinvested, will be informed whether they have won by email or text message and can check the online prize checker at or the NS&I prize checker app to see the value of their prize.

NS&I announced on 24 June 2021 that it would no longer be phasing out the use of Premium Bonds prize cheques, so you can choose to have your prizes paid directly to your bank account (or NS&I Direct Saver account) or reinvested into more Bonds, or you can have them paid by cheque.

You can let NS&I know your preference for receiving prizes by logging into your account at and amending ‘Your prize options’ under the ‘Your profile’ section. NS&I says it will never call customers and ask for their bank details. Alternatively, you can call NS&I on 08085 007 007 and let them know how you’d like to receive any prizes.

What are the chances of winning a prize?

The odds of each £1 Premium Bond winning a prize in each monthly draw are currently 34,500 to one, and the prize-fund rate is 1%, rising to 1.4% from June.

This means that if you held every single Premium Bond there is, your winnings would in theory currently work out at 1% of the amount you invested. However, some people won’t win anything and others will win more than this, so this figure shouldn’t be relied on as a guide to the actual returns you’ll end up with – you might get a lot less.

Bear in mind, that if you aren’t lucky enough to win prizes regularly, inflation will reduce the purchasing power of your money over time.

What if I think I might have an unclaimed Premium Bond prize?

There’s currently around £75m in Premium Bond prizes lying unclaimed. Prizes often aren’t collected because people have moved home and forgotten to notify NS&I of their contact details.

You can find out if you’ve won a prize using NS&’s Prize Checker tool. This enables you to check whether you’ve won in the latest draw, in the last six months, or if you have any unclaimed prizes in any draw.

Which is better - savings accounts or Premium Bonds?

That entirely depends on how lucky you are! Whereas with a savings account you’ll definitely receive the advertised rate of interest, if you have Premium Bonds, there’s no guarantee you’ll win anything.

Sarah Coles, senior personal finance analyst at Hargreaves Lansdown said: “Premium Bonds are a national treasure, and they haven’t lost their lustre. During the pandemic, savers flocked to familiar brands, and while they left NS&I’s other products in droves when rates were cut, Premium Bonds held firm.

“However, at a time of rising rates and soaring inflation, the opportunity cost of holding Premium Bonds rises.”

Although savings rates are gradually ticking up, whilst they are still relatively low, many people are happy to accept the risk they might not win anything and may prefer to put their money into Premium Bonds, especially as their initial investment is protected, and they can cash in their bonds at any time.

Ms Coles said: “You may decide that the vanishingly small chance of winning a life-changing sum of money is worth giving up a rate of interest that’s so far behind inflation at the moment. Alternatively, you may decide that you need your savings to work as hard as possible for you at times like this, without relying on luck.”

It’s down to you to decide whether you want to put your money into Premium Bonds or whether you need guaranteed returns from your savings, however limited these may be. Remember that you don’t have to pick one or the other, you might, for example, choose to put a bit into both so that you have a chance of winning a prize, but you’ll still be earning interest on some of your savings.

Do you hold Premium Bonds or are you thinking of putting money into them? Do you think they are a good or bad investment? You can join the money conversation on the community or leave a comment below.


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