What are Premium Bonds?

The basics

Premium Bonds are a form of investing money.  Instead of paying interest, Premium Bonds are entered into monthly prize draws, giving investors the chance to win anything from £50 to £1 million - and all prizes are free of UK income tax and capital gains tax.

Investing

The minimum investment is £100, the maximum is £30,000.  Each bond costs £1 and is identified by a series of numbers and letters.  Investors receive a certificate giving them a holder’s number, which corresponds to the bonds they own.  The minimum investment now stands at £100, which buys 100 bonds and therefore 100 chances to win. The maximum investment is £30,000. Bonds are issued consecutively so a single investment will buy a block of numbers

Prizes

Every month NS&I gives away more than one million tax-free prizes, including two jackpot prizes of £1 million each.  In the May 2007 prize draw, the total prize fund was over £104 million.

The prize draw

Each month ERNIE, a random number generator, produces a list of several million numbers which are matched to the bonds that have been sold. The first two matching numbers win the £1 million jackpots, while the other numbers are allocated smaller sums.  For December 2006 and June 2007, there are five £1 million jackpot prizes.  Every month the winning Bond numbers are drawn entirely at random by ERNIE which is a random number generator.  ERNIE is not a computer so cannot be programmed in any way.  More information on ERNIE is available here.

Odds and prize fund rate

The odds of any individual Premium Bond number winning any prize are 21,000 to 1.  The prize fund rate (a nominal interest rate) is currently 3.80% per annum (variable) tax-free and this is equivalent to a month's interest on all Bonds in the draw.  For the special prize draw in June 2007 the prize fund rate will increase to 3.95%.

Receiving winnings

Winners of all medium and lower value prizes are sent a prize warrant (a cheque) made out to the winner.  People who win a higher value prize are sent a claim form and the winners of the two £1 million prizes are paid a personal visit by Agent Million.  Prizes can be reinvested in bonds, subject to the £30,000 maximum holding, or paid into a bank or building society account.  Premium Bonds holders can also check online to see if they've won, by using the Premium Bonds prize checker.

Who can invest?

Anyone aged 16 or over can buy Premium Bonds.  They can also be bought for a child under 16 by a parent, legally-appointed guardian, grandparent or great-grandparent.  They cannot be bought by aunts, uncles, brothers, sisters or friends.  They cannot be held jointly or transferred to another person's name.

How to invest

Online or by phone with a debit card, over the counter at the Post Office or by post.  Customers can also set up a standing order for just £50 a month after the initial purchase of £100 minimum.

Money back at any time

All or part of a Premium Bonds holding can be cashed in at any time by completing a repayment form and sending it to NS&I.  Payment is issued within eight working days from receipt of the repayment form.

Old and lost or forgotten Premium Bonds

There's no time limit on claiming unclaimed Premium Bonds prizes or any lost or forgotten savings.  Because Premium Bonds do not earn interest, a bond holder, or their estate, gets back the same amount as was originally invested.  So a bond bought in 1956 and cashed in now would still be worth £1, regardless of inflation.

Deceased holdings

Premium Bonds continue to go into each monthly draw for 12 months from the date of death of the holder.  There is no time limit on claiming prizes won during this period and no time limit on claiming a Premium Bonds holding which remains after someone has died.

Detailed information

Visit the Premium Bonds product page on our website for more information.