Premium Bonds: how do you buy them and what are the chances of winning?

Premium Bonds are Britain’s most popular savings product, with the thrill of potentially winning big enticing millions to invest.

But while the chances of claiming a single reward are at their best since 2008, the prize pool is predicted to fall in the coming months.

The Treasury-backed scheme – run by National Savings & Investments (NS&I) – was launched by the government in 1957 to boost post-war savings and has remained a big allure in the decades since.

Prizes are tax-free, there are no penalties for cashing in bonds, meaning they operate a bit like an easy access savings account.

NS&I says the chances of each £1 bond winning a prize are 21,000 to 1 as of its next draw, meaning the annual “interest rate” is currently 4.65pc. However, your money doesn’t actually earn interest – they only way to get returns on your cash is by winning a prize. In this guide we will cover:

• What actually are Premium Bonds?
• How do you buy Premium Bonds?
• Will Premium Bonds odds worsen?
• Buying Premium Bonds for children
• How to check and cash in your winnings
• What to do if you’ve lost your Premium Bonds
• Can you inherit Premium Bonds?
• Other NS&I savings accounts
• Prize draw alternatives to Premium Bonds

What actually are Premium Bonds?

Strictly speaking, Premium Bonds are not savings products. They don’t pay interest. Instead, each £1 invested buys a unique bond number, which is entered into a monthly prize draw.

You can hold between £25 and £50,000 of Premium Bonds, meaning up to 50,000 numbers have the chance of being picked for a prize each month.

A machine nicknamed “Ernie” (which stands for “Electronic Random Number Indicator Equipment”) randomly selects winners, who can receive from £25 to £1m – but there are only two £1m prize winners each month.

You can earn far higher rates from fixed-rate bonds offered by banks and building societies if you are prepared to lock your money up for a year or more – see the best rates here.

On the other hand, you could eclipse any interest you could possibly earn with a savings account by winning a valuable prize (but the odds are you probably won’t).

How do you buy Premium Bonds?

You must be 16 or over to buy Premium Bonds. This can be done online at nsandi.com, over the phone (freephone 08085 007 007) or by completing an application form and posting to: National Savings and Investments, Glasgow G58 1SB.

It is also possible to set up your account so that prizes are automatically reinvested in new bonds. As with other types of investment, this allows your money to benefit from compounding interest.

If you don’t want to reinvest the prizes, you can get them directed to your desired bank account.

Will Premium Bonds odds worsen?

The prize rates offered on Premium Bonds could fall in 2024, after the Chancellor froze NS&I’s fundraising target at £7.5bn in the Autumn Statement. 

NS&I can earn either £3bn more or £3bn less than its government target, but given that it’s raked in £9.8bn in the past six months, it’s unlikely to need much more cash.

The provider’s success in 2023 can be attributed to its market-leading 6.2pc rate on a one-year fix which was launched in August, before being pulled off the market in early October.

Huge numbers of savers rushed to open the account, resulting in the provider leaping past its annual fundraising target.

In order to stop more money flowing in and surpassing the upper £10.5bn limit, savings experts warn the Premium Bond prize fund will likely fall in the coming months.

Buying Premium Bonds for children

Children under 16 can hold bonds, but their accounts must be controlled by a parent or guardian. Once they turn 16, they can take control. 

Anyone can buy Premium Bonds for a child – like adults, they can hold up to £50,000 and they could also win up to £1m.

The bonds are a family-favourite product, with millions invested on behalf of children.

How to check and cash in your winnings

If you’re lucky enough to win a prize, NS&I will let you know. Winners will receive an email with the happy subject line “you’ve just won!”, or you can check your online account or use the prize checker app. 

If you are one of the month’s two lucky jackpot winners you’ll have a visit in person from Agent Million – an individual hired by NS&I to find and inform winners that they have scooped the £1m prize.

You can choose whether to reinvest your prize into more Premium Bonds (up to the £50,000 limit), or have the prize paid out. You can also withdraw your cash at any time.

You can cash in by making a request online, or by phone or post. It should take up to three working days for this to be processed.

If you’ve lost your Premium Bonds

Thousands of winners have never claimed their prizes, in some cases for decades. 

The best way to keep track of your savings and winnings is to register, either online or over the phone. 

Once registered, you can keep your details updated, turn paper documents on and off, and choose whether to have prizes paid directly to your bank account.

Can you inherit Premium Bonds?

If someone dies with Premium Bonds in place, relatives and executors can make a claim for the invested money – but it’s not always easy to track it down. 

NS&I recently started trying to trace the families of savers it suspects may have died. So far it has returned £2.54m to around 2,000 widows and widowers – around £1,250 per family.

However, having tried to contact more than one million savers and their families whose contact details are not up to date, 150,000 have responded so far. NS&I says it urges anyone with Premium Bonds to check it has their most recent contact details, including those with paper-based Bonds that they were perhaps given as a child. You can make this check at nsandi.com.

It’s the responsibility of the executor of a deceased person’s estate to let NS&I know about a death by completing a bereavement claims form, but Telegraph Money has also spoken to advisers who say bereaved families still face too many hurdles and can spend hours trying to claim their deceased relatives’ money. 

Other NS&I savings accounts

NS&I offers a range of products besides Premium Bonds that pay interest on your savings, and could be a more reliable way of making returns than hoping you’ll receive a prize.

Among its offerings are variable-rate products, such as its Direct Saver and Direct Isa, along with fixed-rate products such as Green Savings Bonds (a three-year fixed-rate account), Guaranteed Growth Bonds and Guaranteed Income Bonds. These are all available online.

NS&I also offers Income Bonds and saving and Junior Isa accounts.

Prize draw alternatives to Premium Bonds

If you fancy trying your luck, Premium Bonds aren’t the only option out there – some other savings providers offer their own prize draws, many of which have better odds of winning.

However, we haven’t found any that come anywhere close to offering a £1m jackpot prize, and some of them have hoops you’ll have to jump through to qualify – such as signing up for a fixed-term account, or needing to save far more than the £25 required to qualify for Premium Bonds.

This article is kept updated with the latest information.