What Are Premium Bonds?
NS&I Premium Bonds are only issued by National Savings & Investments and are an alternative type of savings account you can put money into, and take out of, whenever you want.
They are not strictly a savings account in the traditional way that we have described savings accounts in previous pages, in so far as you do not earn a fixed rate of interest on your savings, you are entered in a monthly draw and need to check the premium bonds prize checker to see if you have won a share of the prize fund.
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 a premium 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 the next 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 34,500 to 1, to 24,000 to 1, and if you are fortunate enough to win a prize, there is a 95% chance that that prize will be £25.
The chance of winning one of the £1m prizes is an eye-watering 58 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 1.2%, there will be £1.2m / 12 of prizes distributed that month, so £100,000. 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 3.15%, (WEF Feb 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 a premium bonds calculator.
A Premium bonds calculator can be found here
What are the Premium Bonds 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-23 Tuesday 3 January
Feb-23 Wednesday 1 February
Mar-23 Wednesday 1 March
Apr-23 Monday 3 April
May-23 Tuesday 2 May
Jun-23 Thursday 1 June
Jul-23 Monday 3 July
Aug-23 Tuesday 1 August
Sep-23 Friday 1 September
Oct-23 Monday 2 October
Nov-23 Wednesday 1 November
Dec-23 Friday 1 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.
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!
Premium Bonds Prize Checker
Many people now use the online premium bonds prize checker to see if they are premium bond winners. This is because you can usually see the results 2 or 3 days before the winners email is sent out.
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 buy premium 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 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. 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 to Buy Premium Bonds?
If you are interested in knowing how to buy premium bonds, then the good news is its pretty easy these days. Originally you would have to go the the local post office and fill in a paper application form and submit it with your cash or cheque. But these days the best way to buy premium bonds is online at NS&I.
Can you buy Premium Bonds with a Credit Card?
No NSI do not accept credit card payments for premium bonds.
Are Premium Bonds Worth It?
Many people ask are premium bonds worth it? Some people think you can get better returns via a standard savings account, whereas others enjoy the tax free prizes that can be won, and are prepared not to win anything from month to month.
You do need to consider your own personal situation before you can answer the question, are premium bonds worth it?
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