What Are Premium Bonds?

Premium Bonds are an investment where, instead of interest payments, investors have the chance to win tax-free prizes. When someone invests in Premium Bonds they are allocated a series of numbers, one for each £1 invested. The minimum purchase is £100 (or £50 when you buy by monthly standing order), which provides 100 Bond numbers and, therefore, 100 chances of winning a prize. You can hold up to £30,000.

With 23 million bondholders holding £32 billion worth of Premium Bonds nationwide, Premium Bonds are one of Britain’s financial success stories. They are a fun, yet serious way of saving, combining the chance of winning tax-free prizes with the peace of mind that comes from knowing your capital is 100% secure.

As well as the two £1 million jackpots you can win anything from £50 to £100,000 for each Bond number you hold. If you win one of the jackpot prizes you will get a visit from one of the Agent Millions.

Each month’s prize fund is equal to one month’s interest on the total value of all eligible bonds. The interest rate is currently 3.4%. The odds of winning a prize are 1 in 22 000, but even with the minimum £100, investment your odds of winning a prize are 1 in 220. These rates vary.

Each month the winning Bond numbers are generated randomly by a machine called ERNIE (electronic random number indicator equipment). After ERNIE has generated the numbers, they are compared in the order they were generated against all eligible Bond numbers – those that match win a prize. Because ERNIE produces the numbers entirely at random, each individual Bond has a separate and equal chance of winning a prize, regardless of when, where and how it was bought. ERNIE’s output is checked every month by the Government Actuary, who is independent of National Savings and Investments, to verify that the draw is random.


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