A Guide To Investing In Premium Bonds

Anthony Burgess (Pension & Investments)

Written by Anthony Burgess (Pension & Investments) on January 29, 2019

Updated January 29, 2019

premimum bonds

Premium Bonds are the biggest saving product in the UK, with roughly 23 million people across the country investing in them. The popular product has been around since 1956 and is increasingly popular or many reasons. This guide covers everything you need to know about Premium Bonds, including what they are, how they work, and how you can invest in them.

What are Premium Bonds?

Issued by National Savings and Investment (NS&I), Premium Bonds are an investment product that works differently to most other savings types. Instead of earning interest or a regular dividend income, Premium Bonds enter you into a monthly prize draw where you could win anywhere between £25 and £1 million in tax-free cash.

Winners are selected randomly by the NS&I, and there are new winners every month. As the NS&I is backed up by a Treasury, your investment is 100% safe, and there is no need to worry about losing your cash.

Premium Bonds do not offer any kind of regular income or guaranteed return. All winners are picked entirely at random, so you may not receive anything at all for your investment.

How do Premium Bonds work?

If you are considering purchasing Premium Bonds, you should be aware of how they work, and the rules around them:

  • The minimum amount you can invest is £100, or if you agree to pay in regularly by standing order, you can invest £50.
  • For every £1 you invest in a Premium Bond, you will get one unique bond number. For example, if you invest £100, you will have 100 unique bond numbers, and each bond number has its own chance to win a prize every month.
  • You can continue to invest in Premium Bonds until you reach the maximum amount of £50,000.
  • When you have had your Premium Bonds for one full month, you will be included in the monthly draw and could potentially win a cash prize.
  • You must be at least 16 years old to invest in Premium Bonds, and you can buy them for yourself or for family members such as children or grandchildren.

If you want an investment that offers a regular income or a guaranteed return, then Premium Bonds are not the right savings product for you. Also, if you are concerned about the impact inflation may have on your savings, then Premium Bonds might not be your best option.

How to invest in Premium Bonds

A few years ago, you could buy Premium Bonds at any Post Office branch. However, this is no longer an option. You must invest in Premium Bonds either online, over the phone, or by post:

  • Invest online: You can invest in Premium Bonds on the NS&I Premium Bonds website by following the easy online links. You can pay in your savings online and sign up to receive alerts if you should win.
  • Invest by phone: If you would rather invest over the phone, you can apply for Premium Bonds by calling NS&I on 08085 007 007 for free in the UK.
  • Invest by post: It is also possible to apply for a Premium Bonds account through the post. You must download the NS&I application form from their website, print it off and complete it to be posted back to them at ‘NS&I, Glasgow, G58 1SB’. You will also need to include a cheque for the amount you wish to buy.

When you purchase Premium Bonds for the first time, you will need to wait one full month before they will be entered into the prize draw. This can mean waiting 5 to 8 weeks before even having a chance of winning as the draws happen at the beginning of each month.

How much can I win with Premium Bonds?

Every Premium Bond that is entered into the prize draw has the same chance of winning, which means it is possible to win multiple prizes in the same month. If you win one month, you will have an equal chance of winning the next month as well, as every prize draw is completely separate.

The lowest prize is £25, and over 2,000,000 people win this every month, whereas the highest prize is £1 million and just two people will win this every month. In total, over 2 million Premium Bonds will win a prize every month, with prize amounts ranging between £25 and £1 million.

When you invest in Premium Bonds you are required to pay an interest rate of 1.35%, and all of the prize money is taken from a combination of all the interest paid by buyers.

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