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Premium Bonds, offered by National Savings and Investments (NS&I), have long been a favourite for UK savers looking for a chance to win tax-free cash prizes. However, while they offer the excitement of a monthly prize draw, how likely are you to win, and is your money really working for you?
How Premium Bonds work
Premium Bonds aren’t traditional savings products because they don’t earn interest. Instead, each £1 invested buys a bond, which is entered into a monthly prize draw. Prizes range from £25 to £1m, and all winnings are tax-free. The more bonds you hold, the better your odds of winning, though prizes are randomly selected. Importantly, the amount of bonds held has no bearing on when or where they were purchased.
Read more: Were you a winner in the October 2024 Premium Bonds draw?
The prize rate — NS&I’s closest equivalent to an interest rate — was 4.4% as of March 2024, after peaking at 4.65% in late 2023. This means that for every £100 invested, £4.40 in prizes are awarded each year.
This rate is variable, meaning it can shift in response to changes in the broader savings market or the Bank of England base rate. However, this 4.4% figure is just an average, meaning most savers will experience returns far below this level.
What are the odds of winning?
According to NS&I, the odds of winning a prize with any single bond are one in 21,000. But for savers hoping for significant payouts, the numbers tell a more sobering story.
For instance, if you invest £1,000 in Premium Bonds, you’d have to wait around 3,500 years for a 50-50 chance of winning £1,000. To have the same odds of winning £50, it could take over 200 years. Meanwhile, a 50/50 chance of winning the £1m jackpot would require a staggering wait of 3.2 million years.
Even if you max out your holding at £50,000, the odds remain daunting. It would take around 60 years to stand an even chance of winning £1,000, and over 64,000 years for a shot at the £1m prize, according to data scientist Andrew Zelin, who analysed the figures on behalf of the Family Building Society.
The chance of winning the £1m jackpot over the course of a year is one in 49,563,028. However, one of the September’s lucky £1m winners purchased the winning bond in February 2024. He had £21,700 in premium bonds.
Are Premium Bonds right for you?
Premium Bonds function like an easy-access savings account with the bonus of prize draws, and they come with no risk to your capital as they are backed by the UK Treasury. But since there’s no guaranteed interest, your money doesn’t grow unless you win — meaning inflation can erode its value over time.
Read more: Best savings accounts that offer above-inflation rates
If you are looking for a steady return on your savings, fixed-rate bonds from banks and building societies offer better rates. These accounts provide guaranteed interest if you’re willing to lock your money away for a fixed term, with rates currently surpassing 5% at some institutions.
How to buy Premium Bonds
You can buy Premium Bonds directly from NS&I in several ways:
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Online at nsandi.com
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By phone at 08085 007 007
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Via post by sending an application form to NS&I, Glasgow G58 1SB
The minimum purchase amount is £25, and you must be at least 16 years old to buy them. You can reinvest any winnings up to the £50,000 cap, or have them paid out to your bank account.
How to check for wins
If you’re fortunate enough to win, NS&I will notify you by email, or you can check your bonds through your online account or the prize checker app. The biggest winners — those lucky enough to scoop the £1m prize — will be visited in person by an NS&I representative known as “Agent Million.”
What happens if you lose track?
If you’ve lost track of your bonds or missed a win, you can register with NS&I online or by phone to update your details and check unclaimed prizes. NS&I allows you to claim prizes as far back as 1957, the year the Premium Bond scheme began.
Overall, there are currently 2,459,320 unclaimed prizes worth £88.4m waiting to be claimed.
British savings bonds
NS&I also offers fixed-rate savings products like Guaranteed Growth Bonds and Guaranteed Income Bonds, which provide more predictable returns over two-, three-, or five-year terms. These bonds, available from £500 to £1m, are backed by the Treasury, offering full protection regardless of how much is deposited.
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However, NS&I recently cut rates on these bonds, following a general trend in the savings market. Rates for the two-year Growth Bond fell from 4.6% to 4.25%, while the five-year option now offers 3.9%, down from 4.1%.
Mark Hicks of Hargreaves Lansdown said these rate cuts suggest that NS&I is not eager to raise significant funds by offering market-leading rates, unlike last year when it briefly led the market with attractive savings rates.
“Anyone considering an NS&I fixed rate bond at these new rates needs to seriously consider whether it’s the right home for their money. There will always be savers who love the brand for its Treasury backing, but given the protections available across the savings market from the FSCS, you’re paying a serious price for additional protection you may not need,” he added.
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