What are Premium Bonds? | Money Mentor (2024)

How Do NS&I Premium Bonds Work?

What happens is that you buy Premium bonds at a price of £1 each, in £25 batches, up to a current maximum value of £50,000 per person. You can buy premium bonds online, or in the post office via apremium bonds application form.

Then, one full calendar month after you bought your bonds, you will be entered into a monthly prize draw to win a variety of cash prizes. These prizes range from £25 up to £1m in value, and each bond has an equal chance of winning, so the more bonds you buy, the more your chances improve. Even if you don't win one month, you can then wait for thenext premium bond draw date to see if you have more luck then.

Premium Bonds Have I Won?

The overall odds of winning a prize have recently increased from 21,000 to 1, to 21,000 to 1, and if you are fortunate enough to win a prize, there is a 95% chance that that prize will be £25 / £50 or £100.

The chance of winning one of the £1m prizes is an eye-watering 60 billion to 1, but on the bright side, you don’t lose your money each month, as you would with the Lotto. You automatically get re-entered into the next monthly draw, unless you take your money out.

The number of prizes and distribution of prizes is determined by the prize fund size, and current interest rate applied to the fund. These change frequently, so keep up to date online.

For example, if the prize fund is worth £100m and the interest rate is 4%, there will be £4m / 12 of prizes distributed that month, so £400,000. In reality, the prize fund is much larger than this, probably in the hundreds of billions of Pounds.

The popularity of Premium bonds has always been high, in fact, nearly half the population of the UK now owns them, and as they are issued by National Savings & Investments, they are 100% safe, having the backing of the UK Government.

Premium Bond Prizes

Every month more than a million prize-winning numbers and premium bond prizes are chosen at random by ERNIE (Electronic Random Number Indicator Equipment) including the lucky £1m winners.

Other premium bond prizes include £25, £50, £100, £500 £1,000, £5,000, £10,000, £25,000, £50,000 and £100,000.

The current Premium bond prize fund interest rate is 4.65%, (WEF September 2023) this rate can vary like any other interest rate, but it gives an indication of the potential prize fund each month and your odds of a win with average luck.

It should be understood that saving sums such as £50, £100, or £500 is not likely to result in a win for quite some time, if ever. The only way to increase your chances of a prize is to buy more bonds.

If you want to know what your odds of winning a premium bond prize is, then you can use apremium bonds calculator.

A Premium bonds calculator can be found here

How are premium bond prizes shared

NSI split the prizes into three value bands – higher, medium and lower – and allocate a percentage share of the monthly prize fund to each band. The higher and medium bands are allocated 10% of the prize fund each, and the lower band uses the remaining 80% of prize funds.

What are the Premium Bonds2024 Draw Dates

The premium bonds draw dates happen on the 1st of every month, so long as the 1st falls on a week day. If the 1st falls on a weekend, then the premium bonds draw will be carried out on the next working day.

There are 12 premium bonds draw dates per year.

Month Prize draw date

Jan-24 Tuesday 2 January

Feb-24 Thursday 1 February

Mar-24 Friday 1 March

Apr-24 Tuesday 2 April

May-24 Wednesday 1 May

Jun-24 Monday 3 June

Jul-24 Monday 1 July

Aug-24 Thursday 1 August

Sep-24 Monday 2 September

Oct-24 Tuesday 1 October

Nov-24 Friday 1 November

Dec-24 Monday 2 December

Maximum Premium Bonds Per Person

The maximum premium bonds you can hold is £50,000. If you held the maximum of £50,000, you would on average, win one-two prizes a month, although they would most likely all be £25.

That said, somebody has to win the big prizes each month, and so there is always a chance you could get lucky, even if it is a very small chance! Many wealthy individuals hold the maximum premium bonds limit as it is a tax efficient way to earn income.

What are the chances or odds of winning Premium Bonds

The chance of winning premium bonds prizes are determined by the number of Bonds you hold, with each Bond having an equal chance of winning.

As of September 2023, the odds of winning a prize with each £1 Bond number are 21,000 to 1. For example, if you hold £21,000 worth of Premium Bonds, which is equal to 21,000 Bond numbers, your odds of winning a prize in any given month are about 1 win. If you held half as many you should win 0.5 times per month, and if you held double you should win 2x per month. However, it's important to note that these odds are only an approximation, and there's no guarantee that you'll win a prize.

It's also worth considering the fact that the prize fund rate, which determines the amount of money allocated for prizes, can change over time. The current prize fund rate is 4.65%, which means that the total amount of money paid out in prizes in a given year is approximately equal to 4.65% of the total value of Premium Bonds in circulation. This means that the average return on investment for Premium Bonds is currently around 4.65% per year, although this is not guaranteed and is subject to change.

Are Premium Bonds Safe?

One of the first questions people ask when thinking about investing in premium bonds is "are premium bonds safe?" This is of course a very sensible question, and fortunately for us all, premium bonds are very safe indeed. They are backed by the UK Government, and therefore premium bonds are considered to be 100% safe and secure. i.e. you will not lose any of your investment.

Premium Bond Winners

Premium bond winners will be notified either by email, online using the premium bonds App, or by letter along with the cheque or warrant. If you are one of the lucky £1m premium bond winners, then you will get a personal visit from Agent Millionaire!

How much are Premium Bonds?

Premium Bonds are available to purchase in multiples of £25, with a minimum investment of £25, and a maximum investment of £50,000 per individual, so in answer to the question how much is a premium bond? each and every bond costs and is worth £1.

Premium Bonds Prize Checker

The Premium Bonds Prize Checker is an online tool provided by National Savings and Investments (NS&I) to help people keep track of their Premium Bonds investments.

To use the NS&I Premium Bonds Checker, investors simply need to enter their holder’s number or their unique NS&I number into the online tool. They can then see their total number of Premium Bonds, the value of their holdings, and any prizes they have won in the last six months. The tool also shows a breakdown of past prizes, including the month and year they were won, the amount of the prize, and the location of the winner.

The Premium Bonds Checker is a useful tool for investors who want to keep track of their Premium Bonds and ensure they don’t miss out on any prize money they have won. By checking the tool regularly, investors can see if they have won any prizes and can claim them if necessary.

Advantages of Premium Bonds

These are some of the advantages of premium bonds

Savings are 100% safe and backed by the UK Government
Premiums bonds can be good fun
There is a chance of winning some big prizes
All prizes are tax-free
You can buypremium bonds for children

Disadvantages of Premium Bonds

These are some of the disadvantages of premium bonds

You may not win anything at all
You have to wait a month before being entered into the prize draw
You can usually get a better rate of return with other savings products

It has to be said, that although you can usually earn more interest with a standard savings account, than with Premium bond wins, nothing quite compares to the expectation and hope, of a big prize on the 1st of each month!

When is the Best Time to Buy Premium Bonds?

The best time to buy premium bondsis 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. If you bought them at the beginning of the month, then they would be held for nearly two full months before being entered. So to sum up, the best time to buy premium bonds is on the last day of the month.

How can youBuy Premium Bonds?

If you're interested in buying Premium Bonds, there are a few ways you can do so.

Online: One of the easiest ways to buy Premium Bonds is online through the NS&Iwebsite. You'll need to create an account with NS&I first and provide some personal information, such as your name, address, and bank details. Once you've set up your account, you can buy Premium Bonds in increments of £25, up to a maximum investment of £50,000.

Over the phone: If you prefer to buy Premium Bonds over the phone, you can call NS&I on 08085 007 007. You'll need to have your NS&I number and your password to hand, or your personal details if you don't yet have an account. You can purchase Premium Bonds in the same way as online, with a minimum investment of £25 and a maximum of £50,000.

By post: If you prefer to buy Premium Bonds by post, you can download a premium bonds application form from the NS&I website and send it by post. You'll need to provide your personal details, including your bank details if you want to set up a direct debit. You can also send a cheque for the amount you want to invest, made payable to NS&I.

At a post office: You can also buy Premium Bonds at any UK post office, although the minimum investment is £25 and the maximum is £50,000. You'll need to provide your personal details, including your bank details if you want to set up a direct debit, and your payment.

What is the current Premium Bonds Interest Rate?

As of September 2023, the current Premium Bonds interest rate is 4.65%. This means that for every £1000 you invest in Premium Bonds, you can expect to earn an average of £46.5 in interest per year. The interest is not paid out on a regular basis like with other savings accounts, but rather, it is paid out in the form of tax-free prizes. Each month, a number of bond holders are randomly selected to win tax-free prizes ranging from £25 to £1 million. The more bonds you have, the higher your chances of winning a prize.

When is the next Premium Bond draw?

Premium Bond draws usually take place on the first day of each month. You can check the exact date of the next draw on the official website of NS&I or by calling their customer service line. It's worth noting that the date of the draw may occasionally be altered due to bank holidays or other unforeseen circ*mstances.

Premium Bonds Prize Breakdown

This list of premium bonds prizes is correct as at August2023

As an enthusiast with deep knowledge of NS&I Premium Bonds, let me provide a comprehensive overview of the concepts used in the provided article.

1. Premium Bonds Basics:

Premium Bonds are purchased at £1 each in £25 batches, up to a maximum of £50,000 per person.
Purchase options include online or through a premium bonds application form at the post office.

2. Prize Draw Mechanics:

One month after purchase, bondholders enter a monthly prize draw.
Prizes range from £25 to £1 million, with each bond having an equal chance of winning.
The odds of winning have recently increased from 21,000 to 1 to 21,000 to 1.
The chance of winning one of the £1 million prizes is 60 billion to 1.

3. Prize Fund and Distribution:

The number and distribution of prizes depend on the prize fund size and the current interest rate.
The prize fund size and interest rate change frequently.
Prizes are determined based on the allocated percentage of the prize fund for each value band.

4. Premium Bond Prizes:

Prizes include amounts such as £25, £50, £100, £500, £1,000, £5,000, £10,000, £25,000, £50,000, and £100,000.
More than a million prize-winning numbers are chosen monthly by ERNIE (Electronic Random Number Indicator Equipment).

5. Premium Bond Prize Fund Rate:

As of September 2023, the prize fund interest rate is 4.65%.
The rate can vary, impacting the potential prize fund and individual odds of winning.

6. Maximum Premium Bonds Per Person:

The maximum limit is £50,000 per person.
Holding the maximum could result in winning one to two prizes a month, typically smaller amounts.

7. Odds of Winning:

Odds are determined by the number of bonds held, with each bond having an equal chance.
As of September 2023, the odds with each £1 bond are 21,000 to 1.

8. Safety and Backing:

Premium Bonds are considered safe, backed by the UK Government.
Issued by National Savings & Investments (NS&I), ensuring 100% safety.

9. Premium Bonds Checker:

An online tool helps investors track their Premium Bonds, showing total bonds, value, and recent prizes.
Useful for ensuring no missed prize money.

10. Advantages and Disadvantages:

Advantages include 100% safe savings, potential for big tax-free prizes, and suitability for children.
Disadvantages include the possibility of not winning, waiting a month for the draw, and potentially lower returns than other savings products.

11. Best Time to Buy:

The article suggests the last day of the month as the best time to buy to minimize the time before entering the draw.

12. Purchase Options:

Premium Bonds can be bought online, over the phone, by post, or at a post office, with varying minimum and maximum investments.

13. Current Premium Bonds Interest Rate:

As of September 2023, the interest rate is 4.65%, paid out in the form of tax-free prizes.

14. Next Premium Bond Draw:

Draws usually occur on the first day of each month, with occasional date adjustments due to holidays.

15. Premium Bonds Prize Breakdown:

Specific prizes are listed, with amounts correct as of August 2023.

In summary, Premium Bonds offer a unique savings opportunity with the potential for significant tax-free prizes, but the decision to invest should consider individual circ*mstances and goals. The article provides a detailed understanding of the mechanics, odds, safety, and various aspects related to NS&I Premium Bonds.