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Are Premium Bonds worth it, or are you better off ignoring that £1,000,000 top prize? They have been around since 1956, and NS&I says more than 22 million people hold them. That is a lot of people hoping ERNIE picks their number.
I’ll take you through how they work, what you could realistically win, how the tax rules apply, and who they suit. I have dated every figure, because the prize fund rate has changed three times in 2026. NS&I can change it again at any time.
What Are Premium Bonds in the UK?
Premium Bonds are a savings product from NS&I, which stands for National Savings and Investments. NS&I is the government’s savings bank. You hand over your money, and instead of paying you interest, NS&I enters it into a monthly prize draw. Prizes run from £25 to £1,000,000, and they are tax-free.
You are lending the government your money, and the prize draw replaces the interest. Your original money stays where it is. The return changes every month, which is why some people treat Premium Bonds like an investment.
How Do Premium Bonds Work?
Every £1 you hold gets its own bond number. Each month, a computer called ERNIE (short for Electronic Random Number Indicator Equipment) picks the winning numbers at random. Every number has the same chance of winning. Because each £1 is one entry, more money means more chances.
One bond number can win one prize in a draw. But if you hold thousands of numbers, several can win in the same month. You can also win nothing at all. That is the biggest drawback.
NS&I expected its September 2026 draw to include more than 6.5 million prizes worth over £497 million. Two of those are £1,000,000 prizes, and that is the case every month. Most of the other prizes are small: £25, £50 or £100.
From the September draw, the odds are 1 in 21,000 for each £1 bond. That is the chance of winning any prize, not the jackpot. The big prizes are far harder to land.
Maximum Premium Bonds: How Much Can You Hold?
The minimum is £25, and each purchase must be at least £25 in whole pounds. The maximum holding is £50,000 per person. Children under 16 can hold up to £50,000 too, and an adult buys the bonds for them.
Any bond numbers over the limit cannot win prizes. The limit is per person, so a couple can hold £100,000 between them.
Are Premium Bonds Safe?
Yes. NS&I is backed by HM Treasury, and the Treasury guarantees 100% of what you save with NS&I.
Banks and building societies work differently. They fall under the Financial Services Compensation Scheme (FSCS), which normally protects up to £120,000 per person, per firm. That limit rose from £85,000 on 1 December 2025. NS&I does not need the FSCS because the Treasury stands behind it.
Safe has one limit, though. Premium Bonds pay no interest, so prices can rise faster than your money grows. You get your pounds back, but those pounds may buy less.
Are Premium Bonds Tax-Free?
Yes. Prizes are tax-free, and GOV.UK confirms they do not count towards your Personal Savings Allowance.
Whether that helps you depends on your savings interest. Most people can earn some interest tax-free first. Basic-rate taxpayers get a Personal Savings Allowance of £1,000. Higher-rate taxpayers get £500. Additional-rate taxpayers get none. Some lower earners can also use their Personal Allowance or the starting rate for savings, and GOV.UK explains how those allowances work.
At 4.5%, a £1,000 allowance covers the interest on roughly £22,000. If your interest stays under your allowance, it is already tax-free, and the tax-free prizes give you no extra edge.
Tax rates on savings income are also going up. From 6 April 2027, the savings rates rise by two percentage points to 22% for basic-rate, 42% for higher-rate and 47% for additional-rate taxpayers. That makes tax-free prizes a little more valuable for anyone who pays tax on their interest.
What Could You Win With Premium Bonds?
The prize fund rate is the figure NS&I uses to size the monthly prize pot. It was cut to 3.30% for the April 2026 draw. It then rose to 3.80% in July and to 4.35% for the September draw.
Don’t read 4.35% as interest. NS&I says what you win can be higher or lower than the prize fund rate. A few large prizes pull the average up, so the typical result sits below it.
Here is the maths on average prizes. At 4.35%, a £50,000 holding would win about £2,175 a year if luck were exactly average. It will not be exactly average for you.
The odds give a clearer picture of how often you might win. This table uses NS&I’s 21,000-to-1 odds and my own calculation, assuming each bond has an equal, independent chance.
| What you hold | Expected prizes a month | Chance of at least one prize in a month |
|---|---|---|
| £1,000 | 0.05 | About 5% |
| £10,000 | 0.48 | About 38% |
| £50,000 | 2.4 | About 91% |
So with £1,000, you will often go months with nothing. With £50,000, a prize in most months is very likely, but it is never guaranteed.
Are Premium Bonds Worth It Compared With Savings Accounts?
Let’s compare £50,000 in Premium Bonds with £50,000 in an easy-access savings account. I’ll use 4.5% for the savings account as an example rate. Rates change, so check the current best rates before you decide. NS&I’s own Direct Saver, for comparison, pays 3.75% from 18 August 2026 and that interest is taxable.
| £50,000 for one year | Before tax | After tax |
|---|---|---|
| Easy access at 4.5%, basic-rate taxpayer | £2,250 | £2,000 |
| Easy access at 4.5%, higher-rate taxpayer | £2,250 | £1,550 |
| Premium Bonds at 4.35%, average luck | £2,175 | £2,175 |
The tax figures assume this is your only savings interest. For the basic-rate taxpayer, the £1,000 allowance leaves £1,250 taxable at 20%. For the higher-rate taxpayer, the £500 allowance leaves £1,750 taxable at 40%.
Here is what that shows. A higher-rate taxpayer can come out ahead with Premium Bonds on average luck. A basic-rate taxpayer is close to level on average, but the savings account is guaranteed and the prizes are not. And if your interest sits within your allowance, the savings account wins.
To see how a guaranteed rate builds up over a few years, try my free compound interest calculator.
So are Premium Bonds worth it? Against other places to stash your money, it is a personal choice. The more you hold, the more likely you are to win something. You are never guaranteed a win.
Who Premium Bonds Suit (and Who Should Skip Them)
Premium Bonds tend to suit people who pay tax on their savings interest and have already used their allowances and their ISA. They also suit people who enjoy the prize draw and can live with months of nothing.
I think it also depends on what the money is for. Premium Bonds are a poor fit if you need a guaranteed return; for example, for an emergency fund you cannot afford to see grow slowly. If you have a mortgage, it can also be worth weighing up overpaying your mortgage against investing before you lock money into either.
Premium Bonds also work as a gift. Anyone aged 16 or over can buy them for a child under 16. If you are saving for a child over many years, it is worth looking at how to invest for your kids too. Remember that investments can go down as well as up.
A Home for Your Tax Fund
I’ve heard of self-employed people using Premium Bonds as a place to keep their tax fund, and I think it is a great idea. That money is needed in the short term, so investing is out. But it is also not money that would be wasted if it did not grow.
If your side hustle income is starting to add up, a tax fund may be on your list. Check how long a withdrawal takes before your tax deadline, and remember new bonds do not enter the draw straight away.
How to Buy Premium Bonds
Anyone aged 16 or over with a UK bank account can buy Premium Bonds. You can buy online or by phone with a UK debit card, and NS&I does not accept credit cards. You can also apply by post with a cheque. You can set up a Premium Bonds account on the NS&I website.
Once you hold some bonds, you can top up by bank transfer or standing order. NS&I’s bank transfer guide says the payment must come from a UK account in your name, and you use your holder’s number as the reference.
You can choose to have prizes paid into your bank account or reinvested in more bonds. You can also cash in some or all of your bonds whenever you like.
Best Time to Buy Premium Bonds
NS&I says new bonds must be held for one full calendar month before they enter the prize draw. If you buy at any point in November, your bonds go into the January draw.
That has a handy side effect. Buying on 1 November or 30 November makes no difference to which draw you enter. If your cash is earning interest in a savings account, you could leave it there until late in the month. Allow a few days for a bank transfer to arrive, because NS&I’s standing order form tells people buying near month end to check how long their bank takes.
You cannot time the prize rate in any useful way. It was cut in April and raised in July and September, and NS&I can change it whenever it wants. For most people, the best time to buy is when you have decided Premium Bonds suit the money in question.
My Take on Whether Premium Bonds Are Worth It
I see Premium Bonds as a great savings tool and a fun way to be in with a chance of a big prize without throwing money away every week. Whether they are worth it for you depends on your tax band, how much you hold and what the money is for.
Have you heard of Premium Bonds before? Do you think they are worth it? Let me know.
This article is general information, not financial advice. Figures were checked on 12 October 2026, and NS&I can change the prize fund rate, odds and prizes at any time.
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