Premium bonds have been around since 1956 and are trusted by more than 24 million Brits. But are they actually worth it? Or are you best off avoiding the pull of that £1,000,000 top prize? Let’s take a deep dive.
What are they?
Premium Bonds are a lottery bond scheme run and issued by the UK government. They are a type of savings accounts where you store your money but instead of getting paid an interest rate, you are entered into a monthly prize draw.
This is a tax-free savings account which is often considered an investment as the return rate flucuates. You are essentially lending the government money and in return they are entering you into a monthly lottery where you could win up to £1,000,000.
How does it work?
Premium Bonds work like a lottery, except the money you pay to enter never decreases. This scheme is run by NS&I, which stands for National Savings and Investments. A government run financial instution.
Bonds are issued in £1 increments with every £1 invested being 1 entry into the monthly draw. You need to buy 25 bonds (£25) to open an account but can hold anywhere from £1 to £50,000 in the account. Every month, ERNIE, the computer software randomiser system they use to decide the winners, runs the monthly draw.
It is super easy to set up an account and buy your first bonds. You can buy and sell the bonds as and when you’d like. Essentially, Premium Bonds are a savings account where you can store your money and be in with a chance of winning money each month instead of receiving an interest rate.
Set up a free Premium Bonds account here.
Is it legit?
Short answer, yes!
Premium Bonds through NS&I have been around for decades and are a legit savings account for Brits looking to stash some cash. Your money is protected and backed by the UK Treasury. This means that the only reason you would lose your money is if the UK economy itself topples. Plus, under the FCA your money is only protected up to £120k but with NS&I they protect 100% of your money.
What could I win?
For every £1 you hold in bonds, you get 1 entry into the monthly prize draw. Prizes start from £25 and increase to the top prize of £1,000,000. Here is the current prize pot split…
The prize pot for July 2026 is 441 million pounds split across 6.3 million prizes. Every month, there are two £1,000,000 prizes on offer and then the exact numbers of the subsequent prizes differs depending on the prize pot. Plus, because each bond is 1 entry, it is possible to win multiple prizes each month. It is also possible to not win anything in a given month. That’s the biggest drawback of Premium Bonds.
Are they really worth it?
Not being guaranteed a win is the biggest drawback of Premium Bonds. Currently the odds of winning a prize are 1 in 22,000. And with every bond being within a equal chance of winning, your odds increase the more money you have invested.
Let’s say you hold the maximum of £50k. With the current odds, you’d have a 50,000 in 22,000 chance of winning a prize. Meaning it’s very likely but never guarnateed. Money Saving Expert has a great probability calculator on their website which is fun to play around with. According to this calculator, if you have average luck and hold the max, you can expect to win roughly £1650 over the course of a year. This is an effective interest rate of 3.3%.
Let’s compare this to having £50k stashed in an easy access savings account. Currently you can get around 4.5% on an easy access savings account which would be an annual return of £2250. But then the interest would be taxable, compared to the tax-free premium bond winnings.
That’s all to say, that whether or not Premium Bonds are actually worth it in comparison to other places to stash your money is a completely personal choice. The more you have in bonds, the more likely you are to win a prize but you’re never guaranteed a win.
I also think it depends on what the intended use of the money is. I’ve heard of self-employed people using Premium Bonds as a place to store their tax fund which I think is a great idea. This is money that will be needed in the short term so investing is out but not necessiarly money that if it didn’t increase would be a waste.
Premium Bonds are ultimately a great savings tool and a cool way to play a lottery without throwing away money every week. Have you heard of Premium Bonds before? Do you think they are worth it?
