Premium Bonds | MoneyHelper (2024)

FAQs

What is the downside of Premium Bonds? ›

Disadvantage: Low odds:

While the calculations necessary for working out how likely you are to win are very complicated, it is currently estimated that the chance of winning any value of prize is 1 in 24,500, for each individual Bond held.

How safe are Premium Bonds? As with other NS&I products, all the money you put into Premium Bonds is secure. NS&I is backed by the Treasury - this means that your cash is protected in full, rather than just the backing offered by banks under the Financial Services Compensation Scheme.

Premium bonds are a savings account issued by National Savings & Investments (NS&I) on behalf of the UK government. Instead of interest, investors are entered into a random draw to win up to £1,000,000.

Are my old Premium Bonds still valid? Yes. As long as you haven't cashed your Bonds in, they're still valid and they're still being entered into our monthly prize draws.

On average, even with 50,000 bonds, you would wait 99,450 years before having an even chance of winning one. In the two hundred millennia since hom*o sapiens first appeared, you might have expected two.

The bigger prizes on offer

Someone with the £50,000 maximum holding now has a 1 in 38,855 chance of winning £100,000, compared with 1 in 392,733 a year ago.

While Cash ISAs and Premium Bonds are very low-risk, they are unlikely to offer high returns. If you're happy to take more risk for the possibility of better returns, then a Stocks and Shares ISA might be better for you.

Prizes range from £25 to £1 million and are all tax-free.

Winnings Each Month

You should win one or more prizes from four draws each year.

Example of a Bond Premium

A person would buy a bond at a premium (pay more than its maturity value) because the bond's stated interest rate (and therefore the bond's interest payments) will be greater than those expected by the current bond market. It is also possible that a bond investor will have no choice.

What happens to Premium Bonds when someone dies? ›

Dealing with Premium Bonds after someone's death

Assets are generally sold or encashed during the administration period, although some can be transferred to beneficiaries who wish to keep the holding.

It's easy to buy Premium Bonds, all you have to do is apply through the NS&I website. Alternatively, you can apply over the phone by calling 08085 007 007 or +44 1772 329880.

You can cash in your Bond at the end of the 3-year term with no penalty. You can also cash in before that, but we will deduct a penalty from your payment equivalent to 90 days' interest on the amount cashed in.

There's no investment risk: Because Premium Bonds are government-backed there is no chance of losing your money.

They can be held for the full 30 years or sold before then. However, if you hold the bond for 20 years, no matter what the rate is, the face value doubles.

We pay out two £1 million jackpots each month. We then divide the balance of the prize fund share allocated to the higher value band equally among the remaining prize values.

In January 2023 NS&I announced an additional Premium Bond prize rate increase was to take effect at the start of February. The prize rate is now 3.15% and the chances of a win at the monthly draw are 1 in 24,000.

The rule stipulates investing 90% of one's investment capital towards low-cost stock-based index funds and the remainder 10% to short-term government bonds.

Every month, the Treasury-backed National Savings and Investments bank (NS&I) pays out millions of prizes, ranging in value from £25 to £1m. Figures dating back to 2004, revealed by a Freedom of Information request, show that the luckiest bondholder over this period won 288 prizes.

Can you win more than one prize on premium bonds? Yes, however, each £1 bond can only have the chance to win one prize per month. They can win time and time again though.

How many people hold the maximum Premium Bonds? ›

Despite 21.4million savers collectively holding £107.4billion in Premium Bonds at the start of this month, £46.1billion of that is held by just 920,000 people who hold the maximum £50,000, according to figures from National Savings & Investments.

Some of the disadvantages of bonds include interest rate fluctuations, market volatility, lower returns, and change in the issuer's financial stability. The price of bonds is inversely proportional to the interest rate. If bond prices increase, interest rates decrease and vice-versa.

Discount bonds can be riskier but the lower the price, the higher the potential for gains. Premium bonds can deliver higher returns with less risk, but they can be problematic if they become callable.

NS&I will notify winners via email or text. If you opt to have your prize transferred to your bank account, you'll receive it by the seventh working day of the month. Alternatively, you can choose to have your prize reinvested into more Bonds.

The quickest way to find out if you've won a prize is to use our prize checker. It'll show you this month's prizes, anything you've won in the previous six draws, as well as any older prizes that you haven't claimed yet. We update our prize checker on the day after the first working day of each month.

Premium Bonds offer a way of investing anything from £100 to £50,000. Each month a draw is made and around £100m is won by Premium Bond holders. The top prize is a £1m jackpot. Tax and you do not need to declare it on your tax return.

The best time to buy premium bonds is on the last day of the month, as this means they are only held by NSI for one month and one day, without being entered into the prize draw.

It uses BACS to make payments, which takes up to three working days. This is definitely something that savers using Premium Bonds should be mindful of when withdrawing – particularly over weekends. For someone withdrawing on a Saturday morning won't see the money in their account until Wednesday.

What is the price of a premium bond? ›

A bond that's trading at a premium means that its price is trading at a premium or higher than the face value of the bond. For example, a bond that was issued at a face value of $1,000 might trade at $1,050 or a $50 premium.

Calculating Par Value

A bond's par value is the face value of the bond plus coupon payments, annually or sem-annually, owed to the bondholders by the issuer of the debt. A bond with a par value of $1,000 and a coupon rate of 4% will have annual interest payments of 4% x $1,000 = $40.

What happens to someone's Premium Bonds when they die? Unlike most other assets, Premium Bonds cannot simply be passed on to beneficiaries of the estate, as they cannot be transferred into someone else's name.

Get a certified copy of the death certificate for everyone who has died who is named on any of the bonds. Have each person who is entitled to a distributed bond also fill out and sign the appropriate forms: If they want cash for their bond: FS Form 1522.

Premium bonds cannot be held jointly with another person. Additionally, premium bonds cannot be nominated to pass to a beneficiary when a person dies.

At the Post Office we continue to offer our customers a broad range of savings products to meet our customers' needs from ISAs to Instant Saver to longer term investments such as our Fixed Rate Bonds which are available in branch, and online.

Premium Bonds

Parents, legal guardians and (great) grandparents can invest on behalf of their child or grandchild aged under 16.

You can cash in your Premium Bonds at any time without penalty. If you're registered with an online account, you can do it straightaway.

Do Premium Bonds give a good return? ›

What is the average rate of return on Premium Bonds? You don't get a Premium Bond interest rate like you would have with most savings products, instead they have an average rate of return. For every £1 bond, the odds of you winning a prize are 24,000 to one, so pretty slim. This translates to a “prize rate” of 3.3%.

Premium Bonds are not an asset that can be passed on to a beneficiary in the same way that funds from bank accounts and savings accounts can; they cannot simply be inherited or transferred to someone else's name.

The interest rate for Series I Bonds is unimpressive in some economic environments. But during the high inflation period of 2022-2023, however, these bonds are extremely attractive. Bonds issued in the six months leading up to October 2022 paid an impressive 9.62% interest rate.

Savings bonds are a government-backed, reliable investment that earn interest, reaching full maturity after 30 years.

Series EE savings bonds are a low-risk way to save money. They earn interest regularly for 30 years (or until you cash them if you do that before 30 years). For EE bonds you buy now, we guarantee that the bond will double in value in 20 years, even if we have to add money at 20 years to make that happen.

While Cash ISAs and Premium Bonds are very low-risk, they are unlikely to offer high returns. If you're happy to take more risk for the possibility of better returns, then a Stocks and Shares ISA might be better for you.

Winnings Each Month

You should win one or more prizes from four draws each year.

There is no evidence to suggest that buying premium bonds in a block increases your chances of winning. However, the more bonds you have, the greater your chance of winning a prize. If you have some spare cash that you can't afford to lose, you could use this to buy premium bonds.

Bonds have some advantages over stocks, including relatively low volatility, high liquidity, legal protection, and various term structures. However, bonds are subject to interest rate risk, prepayment risk, credit risk, reinvestment risk, and liquidity risk.

How much can I invest in Premium Bonds? You can invest from as little as £25 in Premium Bonds and hold a maximum of £50,000. This would give you between 25 and 50,000 entries in the monthly prize draw.

How long does it take to cash in Premium Bonds? ›

How long does it take to cash in Premium Bonds? According to NS&I, it takes up to three banking days for the money to reach your account, unless you have elected to cash in after the next draw.

Premium Bonds offer a way of investing anything from £100 to £50,000. Each month a draw is made and around £100m is won by Premium Bond holders. The top prize is a £1m jackpot. Tax and you do not need to declare it on your tax return.

Despite that, says Coles, people need to remember that the odds of a win are still 24,000-1, “so the average person with average luck will still win nothing”. She adds: “By putting your money into bonds, you're giving up any interest you might have earned on your money elsewhere.”

Because yields are higher today than at any time since the 2008 global financial crisis, bonds now have better expected returns and can cushion against further price declines. An overweight to cash or very short-term securities worked well in 2022, but adding more duration exposure could prove valuable going forward.

The best time to buy premium bonds is on the last day of the month, as this means they are only held by NSI for one month and one day, without being entered into the prize draw.

Some of the disadvantages of bonds include interest rate fluctuations, market volatility, lower returns, and change in the issuer's financial stability. The price of bonds is inversely proportional to the interest rate. If bond prices increase, interest rates decrease and vice-versa.

You can make money on a bond from interest payments and by selling it for more than you paid. You can lose money on a bond if you sell it for less than you paid or the issuer defaults on their payments.