Find out exactly what premium bonds are and whether they’re worth investing in.
A premium bond is effectively a savings account from NS&I (National Savings and Investments), into which you can deposit between £100 and £30,000.
What makes premium bonds different to standard savings accounts is that instead of earning interest on your invested money, you enter a monthly prize draw, with the chance of winning between £25 and £1million.
The chance of winning a £1million jackpot has made premium bonds hugely popular with UK savers, ever since they were first introduced in 1956. But just how likely you are to win big with these bonds, or indeed win anything at all, is worth questioning.
From 1st August, 2013, the way Premium Bonds prizes are calculated will change, with implications for both the prizes on offer and your chances of winning.
The prize fund for each month's draw is determined by an interest rate applied to the total bonds held. Until July 2013 the prize fund was set using an interest rate of 1.5%, with the chances of winning one of the prizes at around 24,000/1 per £1 bond.
From 1st August, the interest rate used to calculate the total prize fund will drop to 1.3%. This will reduce the number of prizes available in each of the Higher, Medium and Lower value prize bands, meaning your odds per £1 bond should drop to around 26,000/1.
Otherwise, how the prize bands are built within that fund will remain the same: see the NS&I website.
If you open a premium bond account you are able to invest between £100 and £30,000. In return you’ll receive the equivalent amount in bonds. For example, if you invest £100, you would receive 100 £1 bonds.
You can buy bonds online from NS&I over the phone, at the Post Office, or with a regular monthly payment by standing order. Anyone over the age of 16 can buy them, or they can be purchased by parents or grandparents for those aged under 16.
The bonds each come with a unique number and are put into a prize draw a month after you’ve bought them. They will be re-entered in each subsequent draw until you decide to cash them in.
In times of banking instability, you may be comforted to know that investing your money in a premium bond ensures that your money (up to the £30,000 maximum investment) is completely safe. This is because NS&I is backed by HM Treasury. Also, your capital itself is not gambled in the prize draw - only the interest that you might have earned on that capital.
Another thing worth noting is that there is no minimum length of time that you must hold the bonds. You can cash them in any time you like from the time you invest, although new bonds can’t be cashed in for a month after they are first purchased. Also, it will take up to 8 days to withdraw the money after you have decided to cash in.
If you do win a draw, any prize money (from £25 to £1million) will benefit from tax-free status. You may opt to re-enter your winnings into the draw in the hope of winning even more, an idea which is supposed to imitate the compound interest you would get on a standard savings account (the interest earned upon interest over a year).
Unfortunately, the many catches of investing in a premium bond arguably outweigh the benefits. Firstly, it’s worth considering exactly how likely you are to win in the monthly prize draws.
Of an average 40 billion bonds entered in the prize draw each month, the prize ratio works as follows:
Around 1 million bonds are awarded £25 prizes
This means that your chances of winning the top £1million prize are about 40 billion to 1, odds that make a jackpot win at the National Lottery seem a sure bet in comparison (around 14 million to 1).
Another thing that should be taken into account is that although your invested capital is safe in a premium bond, inflation means the value of that money will go down over time – and with no interest earned to offset that loss of value you’ll effectively end up with less than you started with.
The NS&I refer to any payouts as ‘wins’, the lure of which can be very attractive to those wanting to earn some money back on what they invest. However you are likely to win less than the interest earned on a standard savings account, which could be around 2-3%, so you may be much better off investing your money in a top savings account or tax-free ISA instead.
These will enable you to earn money on what you invest and will pay you a better return than the average you will get back from premium bond wins. You could even think of the interest paid on your savings as a ‘win’ in itself – and one that is guaranteed to be paid out to you on a regular basis.
The premium bonds are described on the NS&I site as ‘an investment which offers the fun and excitement of a chance of a big win.’ However you should remember that premium bonds are government-backed products that help to generate government funds, so it is understandable the NS&I would want to sell them to the public in this way.
In general, premium bonds aren’t really worth considering in terms of a realistic return on your money. Although there is a chance that you could win big, this chance is negligible at best.
If you are a higher-rate taxpayer and have already used up your tax-free ISA allowance, perhaps these bonds could suit you – if the chance to win prize money is more important to you than earning a guaranteed return on your money. But for the majority of savers who want or need to earn interest, a top-paying savings account is likely to be a better option to take.
In this way, premium bonds should be seen not as a viable savings account or investment, but as a way to forego earning interest in favour of gambling that interest on the chance of winning money.
I have had 20 Premium bonds since they started I am now 75 years and have never won a penny, so what this article is saying is spot on 40million to one odds says why we have little chance. I will still leave them in. I have had the best growth from ISA,s but you have to take the risk. Over time they rise in value I find.
I have found that cashing in bonds that have never won prizes and buying new ones has produced the odd win in a short time scale.
well, i have won £125.00 this year (and the year is not out yet) so far and that is more than the interest i would have got on an isa. with £25,000 invested.
that's not right , Lloyds did an isa last year 3.7% at £25000 is equal to £925 so I think you need to shop around my dear!!!
I am very switched on with low risk investment and shop around a lot for good rates there are many at 3% at the moment so bonds are actually not a good investment and its only the thought that you may win big that keeps you here I have bonds but will only invest for 12 months then get out you could earn £720 a year on £30000 in a current account at Santander and an isa is also a good deal .
if you can bye ?100s worth then cashin your ?20.
I need a strong brandy
that guy has waited 75 years .....take your money and buy a strong brandy
I do understand that not cashing in the bonds! I bought £10 worth in 1978, thinking it was an investment account. I am a nurse and that was my overtime funds. I have never won a penny! Yet, I am told of people who have won small sums more than once.
If you can afford to leave your money in bonds that's fine because your money is safe,,. But and I say again But,,.your chance of winning a big prize in bonds at 40billion to 1 to coin a well known saying you have!nt got a dogs CHANCE, .
Do the maths. Own 1000 bonds and your chances are 40million to 1. Own 4000 bonds and it's 10million to 1. Better than the lottery and you still have your stake for the next draw. If you don't win, buy more!
With Premium Bonds you lose nothing, and have a `Hope & a Prayer`of a win.The Lottery is a gamble if you can afford to lose.ISA`s are the most likely less long term gamble (15 yrs.) to show a worthwhile return
don't forget they loose 5% a year in inflation
Interesting article .But are they really worth a gamble ?
The chance of winning phrase '41 billion to one' assumes you only hold one bond, so is very pessimistic. Assuming a person held the maximum holding of 30k, the odds of winning the jackpot would be 41 billion divided by 30,000. So, the odds would become 1,366,666:1 (just over one and a third million to one) - much better than 41 billion to one.Also, as there is currently 41 billion invested in PB's between 22 million people collectively, this means the average holding is 41 billion divided by 22 million, which comes out to 1863 PB's as the average number of PB's to each person. Therefore, in round figures, unless you're investing £2000 or more in PB's, you might as well invest in a bank account, as if you hold less than the average number, you will on average, have less than average luck. So, in my opinion, anyone looking for a flutter on the Premium Bonds needs to be putting in £2k or more.
I might have the maths wrong but isn't it 41billion - 30000? ie still c 41 bbillion
It's 41 billion / 30,000
It seems to me the only winners are the gov, dont waste your money on these bonds, get a good savings acc, or buy gold.
Don't give Corrupt.Gov. ANYTHING !They rob us all enough as it is !
Given that interest on savings accounts is derisory, and your capital is safe in PB's, I don't think they're that bad a deal.
peasnbarley should be peabrain, there couldn't be a worse time to BUY gold as its at a premium?Exactly Feline123, and unlike the lottery you get chance after chance and still get your money back whenever you want it. There really are some Numpties on this forum?
It is a risk free gamble if you can afford it !!!
My wife bought a single £1.00 Premium bond on 15th. August 1958 at London's Euston Rd. Post Office, without a single win up to date. Can anyone beat that?
Well , I've never had any , and to date have won nothing !
My late father bought £5,000 in bonds and in the first draw he got £1,000 and two months later £100. He died about four years later and won the month after he died and then just before they had to be cashed.
Mum bought 30,000 for my boys last month and won immediately.£500 a month, bets sod all from a bank!
I invested 30,000 four months ago and have won 2 lots of £25 for three months in a row (ie, every month they have been eligible for a prize, £150 in total). It is exciting to think that each month I may get an email from my good friend ERNIE alerting me to another win. Of course, I would have to keep winning at this rate to match a gross 3% interest rate, but one substantial win would do a lot better than that and it's much better than the Lottery as I don't lose my stake!
Ernie has continued to come up with good news for me. I have now won FIVE months in a row, 2 x £25 on four occasions and 4 x £25 on the other. By putting the winnings int a 2.9% (one year) savaings plan, this is matching the better interest rates and also keeps me in with a chance of winning a much bigger prize.
I can beat that Tallin, my grandmother bought me a pound premium bond in march 1957 when i was born and ive never won anything either.....ps, also a pound was worth a lot more than it is now!
I live in New Zealand. Both parents have passed on. Just discovered two 10 pound bonds they bought in 1977. Checked the numbers and found that one of them has won 50 pounds. Does the prize compound into more bonds??
Are Premium Bonds transferable after you die. Can you leave them in your will?
I don't think that they are transferable sbooth282. When my Dad died he had told my Mum that he wanted the cash refunded from the £20,000 worth of bonds to be shared between us 4 children as they could not be transfered. He did have quite a few small wins in the 20 years he held them but never anything major.
That's right, Dolly. They can be cashed in and will form part of your estate, but they can't be transferred into another name.
Forty one billion divided by two thousand is twenty and a half million.
I was thinking this means if I have two thousand bonds, one of my numbers has a twenty and a half million to one chance of being picked out of ERNIE's hat?
Don't forget the bonds are better than the lottery ! With the lottery you have abet then you lose your money !! It does not go into the lottery again and again and again and you can still get your mone back !!!!! Premium bonds are for me !!!!Tony
We just started with 30k 3 months ago and won 150 quid so farC
and of course, if you win early on in the financial year, you can then reinvest in a savings account and earn additional interest
I keep £18000 in bonds and won a few £25 prizes last year totalling £225. Knocking at the big prize door is how I view it.
I agree! And welcome to the Forum, alan.
the fun of bonds is waiting for the post man to turn up and opening your letter only to be disappointed that its only £25!!!!! I love that feeling of money money money and then nothing !!!!!!!!!!!
I have recently found a premium savings bond for £1.00 which my parents took out for me in 1958 shortly after I was born. I guess at the time that was a sensible thing to do, rather like a childs trust fund now, and £1.00 then is worth about £20.00 in todays money, although I'm sure it represented a bigger value then for them. Anyway, 54 years down the line...........nothing! If they had invested £1.00 in a savings account for me when I was aged 1 year I'm certain it would be worth more than £20.00 now, especially with the years of high interest rates.............oh well! maybe I will have a win before I'm 85!!
Well I hope you do , Jackie !
My Husband and I do not have the full amount allowed, however, we have won small amounts most months - having said that - bet we won't this month ! BUT is there anyone on this blog or someone you may know who has actually had a very large win ? I would love to know if there is hope of that happening......by wantalot
I retired a little while ago and the staff i used to work with won the million a few months after I left. How gutted was I just goes to show you have to be in it to win it
ooooh...I'm prepared to be patient a little longer then - sorry you missed out there though - my sort of luck too ! ! oh..and I did win again that month but nothing I could retire on. What am I like? I,m already retired!! wantalot
It does seem that my £30000 investment is becoming a waste of money. I now seem to regularly miss months, and the wins are generally £25. When I first bought my bonds, I was winning regularly £50 and £100, even £5000, but that seems a long time ago. I am now considering a more lucrative investment.
In 1979 I held the 13 bonds I'd had since birth 11 years earlier. I won £1000. In the early 90's when the prize fund was bigger I was averaging 11% return (tax free of course), and just this last few months whilst we're between houses a £60k chunk of our 'deposit' has been returning an average of £60/mth which beats the 1% gross rate of interest in a bank and also still gives us that 60,000 in 40 billion = 1.5 in 1 million chance of winning the big one, quite a lot better odds than the lottery and the comment above would have you believe. If you don't win, buy some more bonds... it's not like you're really spending it! Also, don't forget that once your £2 on the lottery has had it's chance and lost, it's gone. Not so with premium bonds as you can just wait for you chance the following month at no real cost
I invested 2,000 pounds in premium bonds and have won over double the investement... If you don't win, cash in and re-invest.
the rate for calculating prizes is 1.5% which makes them highly competitive against most instant access savings accounts this article is badly flawed comparing with the lottery where the stake is lost a £1 bond is entered indefinitely and is therefore massively better odds than the lottery at 24,000 to one every month until cashed inobviously you forego a guaranteed but currently pathetic rate of interest but in return you get the chance of receiving from 0% to 1000000% my personal experience over 9 years is an annual equivalent of just over 8% which is well above any high street rate and nearly all long term investments plus the capital is 100% safe and instantly accessible and tax free
The National Lottery being " a sure bet in comparison" what about the fact you don`t get your stake back if it`s not ?? J W
Quite so, jaywil!
I've won over £1700 over 10yrs with a holding of £8000 bonds. the biggest win being £1000 back in 2002. All bonds have been automatically reinvested so my holding is now £9700. I have from time to time been looking to move them to a savings account or ISA, but rates are abysmal so I've left them in for now. I don't know if the money would have been better off in a savings account or not over the same period, but fortunatley it's money I don't need to access right now, so I'm happy to continue gambling!
I agree, marcus!
We have been in Premium bonds, since 1986, and only once won a half decent price 1000 pounds. Never 500. Now quite steadily 25 Pounds which amounts to a little less than interest. They claim that the more you place in the fund, the better your chances. This does not seem to be so. How come you never see a 25 pound, a 50 bond , and very rearly a 100 pound win a prize, and yet there have been thousands of these low value bonds given out every month over many years. It really makes us feel there is a selective team deciding who is allowed to win.
I'm sorry, clbead, but that is not the case.
The winners are picked by a computer and it's perfectly obvious that the more entries you have, the more chance you have of winning.
Do you really expect us to believe that there are people sitting in an office saying, 'I don't like that person so we won't let them win'?
Get a life.
`ERNIE` is his name (the computer that is)..and the current odds of winning is 24000-1 per bond...Minimum purchase is now 100 bonds, and you can always get your money back.. It is common sense that the chances of winning is increased with the more bonds you have.
I note that one subscriber admitting that she has never had a premium bond,wonders why ERNIE has never sent her a cheque `Eyes Roll`
i have £22 in PB's, £2 i bought in 1960 and £20 in 1967, i've had 1 win of £25 that i know of, all i need to do now is find them to check if i've won anything else as can't remember if i updated my address when i last moved, as for cashing them in can't buy a lot for £22 these days but if i hit one of the big prizes that would be a different matter lol
You can check and update your details at the NS&I website, paul, and also check on any unclaimed prizes.
Am I on commission if you uncover an unclaimed million......?
hmmmmmmmmm got to think about that, and i've got to find them first 123 as i don't know the numbers lol
I'm sure they'll find them from your name and previous address, ;-))
To get a true representation you would have to invest £30,000 into a cash ISA and then use the interest earned to buy Lotto tickets, that way your capital is not at risk the same as a pemuim bond.
So if you had £30,000 in The Cheshire BS cash ISA @ 2.5% you would be able to buy £750 worth of Lotto tickets or about 65 a month.
The only differnence is that you would only have to wait two months before it starts to pay on premium bonds unless you have a cash ISA that pays your interest monthly then it is a one month wait to start on the lotto. However if you save the lot untill the end of the year and bang £750 into a rollover the odds of winning are greatly increased. Don't use lucky dips though as you may get the same number twice with such a large amount!
I have £800 in pb. Haven't won anything to date. Not even a small prize, though I think if your not in you can't win so I'll keep investing more each month & keep my fingers crossed that someday I'll win something!
They're not a bad investment with interest rates so low, but I'd advise you to look again if rates ever go up.
Hope you win something!
I also hold an isa account with them so putting money in both each month :)
Clever girl! Best of both worlds.
Your all mad, the pound will continue to devalue, we are in negative interest rate times NOW......2% on Isas what a joke....
Hi tim, and thanks for that constructive comment about our sanity.
Tried both their bonds and ISAs, they say I'm already registered and the farce of getting a new password, cos I've lost the old one, literally takes weeks, had me abandoning the entire banking side and sticking with ERNIES
I've had 2 bonds since 1972 not won a penny
I know someone that has won £25,000 on £20,000 bonds kept and also someone that wins every month who has £30,000, she has won £5,000 and around £25-50 a month. I have around £9,000 and win £25 about every 2 months. The fact of the matter is that you have to be in it to win it!
I know some one that won a six figure sum on the Lotto too! I'm happy just to be content to have a regular income from investments.
I agree with your previous post and have been thinking along the same lines of investing and putting the interest on the lotto but mainly on Hotpicks, 2 numbers pay £40 and 3 pay about £450 and so forth. Better odds and more of a chance of winning something.
one thing I did hear you should sell them every 2 years and then buy them back for some reason it produces more wins !!! apparently
oh and I don't have ginger hair !!!!!and burn like a lobster in the sun
That thing about selling them and buying them back is rubbish. Firstly, you will lose at least one month of being in the draw, and secondly every number has the same chance of wining no matter how new or old it is.
With interest rates so pathetically low on fixed rate saving bonds which provided a monthly top-up to my pension, I am using ERNIE as a holding bank, with the chance of a win, until interest rates rise again. Another advantage of ERNIE is the ability to cash-in in case of emergency, something you are unable to do with the majority of fixed term, fixed rate, bonds
sorry but I get a good rate on bonds just had one at 3.7 which is far better than the premium bonds which I think is as low as 1.6 shop around john 28
with the poor rates of return these days I'd rather take a chance on winning, my 3k might earn me £60pa but gamble that £60 per year and you could possibly end up with a lot more than £60, long odds maybe but someone has to win it and you never know you could have more than one win a year even small wins would offset the pittance you get from the banks!
You got to be in to win
Hello there baggers ! I am in to win it.....however my chances are now shrinking as they've announced another CUT in prize money.Should I buy another £2,000 to keep my chances on course ? They now say the 24,000 to 1 has become 26,000 to 1 - please advise.
Can't say for sure you need one of our experts to advise
Hoping not to offend by posting a link to a rival site, but there's a Premium Bond calculator on moneysavingexpert.com
Tickety boo feline rock on
Will do, Baggs!
Yeh just rock the house down feeling fine feline!!!!!
bottom line its a risk you may win or not but you will always have your investment but remember you will loose 5% a year due to inflation so after a year if you don't win look at something else or your money will slowly disappear infront of you
ive had mine since 1971 an not won anything !!!!
If you think your number is lying at the bottom of the pile, like the hospital waiting room, you could always cash them in then apply for a new batch. On the other hand it depends on the amount you hold, the more you have the better the chance.Wish they would raise the holding limit
If you do that, john28, you will have to wait a month for the new batch to go into the draw.
Uncle Ernie has given me pocket money every single month since November, totalling £900 for the £30,000 investment in ten months. Beats most risk-free savings offers available and keeps me in the hunt for the £1,000,000 each month. I am expecting fewer wins in the coming months, but very happy so far
They're only worthwhile if you have a large amount of them,otherwise not really worth having
yes don't bother with small amounts 30k or nothing . that will probably give you a win each month but usually a £25 not good interest but always chance of big one . the stock market could also be a long term investment .
Premium Bonds belong to the 21st Century and I for one don't waste my time thinking about them as potential investment.
But this IS the 21st century, CS!
Mine are returning more than a savings account would at the moment so I'm happy, and I can get hold of the cash at any time, should I ever need it.
I meant it belongs to the 20st century. It is so outdated!
I know you have to have reasonable luck to make a reasonable return, but there's always the prospect of winning a big prize.
And, unlike the lottery, you get a free entry again next time, and the time after........
I bought premium bonds in 2006 which i think was the 50th anniversary of the draw and have 10k in all,ive won mostly 25 pounds a few 50s and a few 100s,nothing substancial yet this as ammounted to neally 1000 pounds in winnings,id say it i worth investing but i havent had a win for sometime now but the hope of hitting the jackpot or a big win fills me with excitement,at least with these you never loose unlike the lottery which i have been playing the same numbers since 1994 but on had four numbers about 5 times,we all live in hope.
Welcome to the forum, retroboy!
With my luck if I'd have been one of raquel welshs triplets I'd be the one in the middle on the bottle!!
don't forget you will loose 5% a year due to inflation if you have 30000 in a year it becomes the value of £28500 so even if you win £1000 a year its still going down hill. isa is good but generally keep saving all the time to keep head above water or money becomes worthless!!!
I've got 12000 bonds and I win every month
I put any income tax I owe between April and the following January into Premium Bonds. The money belongs to the tax man anyway so I just have fun playing with it before I have to hand it in
i think they are a waste of time. even holding the maximum amounts gives no guarantees of winning an amount equal to the lowest paying interest account.whenever interest rates dropped,so did the prize fund.
I wouldn't say a waste of time but its a gamble and only invest money that you have spare and don't need an income from the interest . isa . fixed rate bond then premium bonds
Just invested 30k in Sept and had my first win of £25 the very next month, Oct, so very encouraging.
Good for you, CHJ, and welcome!
I've got 2 pounds worth feline and never won a penny bought in 1974 when I was just 15
Nice present for grandchildren to share.Toys are not played with for long and expensive.The occasional alternative.
Good thinking, martini. The kids can't grow out of premium bonds!
Well, I can't afford 30,000, but I could manage 5,000. Is it worth it? Still mulling it over. Have had 10 for many years and never won a thing.
Hi, jengra, and welcome.
If I were you, I'd have a go. Your capital is safe and you can cash it in at any time. And with savings rates the way they are the loss of interest is almost negligible so, even with a small win, you would be making a profit.
Feline brains and good looks
Thank you, lovely Baggs!
you guys need to shop around there are plenty of high street banks doing 3% at the moment I am even getting 4% on some accounts, you need to ask more at your bank they don't always offer everything
I have bonds but they are only running at 1% at the moment so looking at selling and maybe reinvest later if rate picks up
Won £25 four times this year on 1OOO bonds so going to increase my chances even more while interest rates on investments at an all time low!!
So reading all these posts, it seems that if you are in the lucky position of being able to spank £30,000 into Premium Bonds, you are likely to regularly win small amounts.I have had £4,000 invested for over five years and won nothing, not a sausage. l have friends with the maximum £30,000 and they often win £25.
yes I am rich
if people in general didnt waste money on flash cars holidays and general rubbish they could have 30000 to invest in premium bonds I live well below my means and that way I can save ... no credit cards for me!!!!!!!!!!!!! and when I get to 60 I will spend like I have no tomorrow and enjoy my last few years in style and expensive meals out . saving is easy its adverts and other people who spend your money think of all the rubbish we buy and what do we actually NEED we just need a bit the rest is for showing off !!!!!!!!!! look at me !!
Well yes you could do that. The state pension is a waste of time,we will sell our house and buy a smaller one to raise some cash if we are still around at age 60.
Doghouse are you always in the doghouse
im thinking of buying £100 worth of bonds just to be in it. see if i can win anything. any comments.
Well you got to be in it to win it as they say Steve
Its interesting to read the winners list, although most people who win do hold lots of bonds, the actual value of the winning bond is £5000. I use premium bonds because I can take out and put in as and when I want. I currently have £5000 invested in parts over two years. Would it be worth withdrawing it and reinvesting it as a whole amount?
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