Caroline Richmond
On 1 April 1994, 37 years after the first draw, National Savings & Investments (NS&I) created the first Premium Bonds millionaire.
In the intervening three decades, Agent Million has travelled around 222,000 miles to deliver the good news to more than 530 bondholders, with winners ranging in age from 3 to 98 years old.
NS&I report that a staggering £30 billion has been paid in prizes since Harold Macmillan launched Premium Bonds in his 1956 Budget. So, is the UK’s most popular savings product still appealing? Read on to find out more.
Premium Bonds give you the chance of winning a £1 million prize
A single Premium Bond costs just £1, and individuals – including children – can hold between £25 and £50,000 of bonds.
As of August 2024, the odds of an individual bond winning a prize in the monthly draw are 21,000 to 1.
In the July 2024 draw, NS&I paid:
- 2 x £1 million prizes
- 87 x £100,000 prizes
- 175 x £50,000 prizes
- 349 x £25,000 prizes
- 874 x £10,000 prizes
- 1,745 x £5,000 prizes
In addition to this, NS&I paid more than 5.9 million prizes of £1,000 or less, with 1.47 million bonds winning the lowest £25 prize.
Money Saving Expert reports that the odds of winning £1 million per £25 of bonds in one month is 1 in 2,489,469,818 (around 1 in 2.5 billion). It’s about a 1 in 57.2 million chance that you’ll win £100,000 or more.
Compare this to the chances of matching all six numbers to win the National Lottery jackpot, which is about 1 in 45 million.
Of course, you increase your chances of winning if you hold a greater number of bonds.
In July 2004, someone in Newham won the £1 million jackpot holding just £17 in bonds, the lowest holding to ever win the jackpot. More than 10 bondholders have won after just two months, the shortest time between investing in Premium Bonds and winning the £1 million jackpot.
Premium Bonds can be a safe haven if you want a secure cash reserve
If the chances of winning a significant prize are so remote, are Premium Bonds worth it?
As with any investment, the answer to that question will depend on your individual circumstances.
However, one key benefit of Premium Bonds is that any prizes are paid tax-free. This can be particularly beneficial if you’re an additional-rate taxpayer where you don’t benefit from a Personal Savings Allowance as all non-ISA savings interest is usually subject to Income Tax.
So, if you’re lucky enough to get a visit from Agent Million, you won’t pay any tax on this prize. Even if you hold the maximum £50,000 and generate several smaller prizes each year, these won’t be subject to Income Tax either.
Additionally, you can cash in some or all of your Premium Bonds any time, making them a highly liquid asset.
Money Saving Expert calculates that, based on the August 2024 “prize rate” of 4.4%, if you hold the maximum of £50,000 in bonds, and you have average luck, the median average annual winnings will be £1,950.
That equates to an annual return of around 3.9% – tax-free – which is relatively competitive for an easy access account.
In addition, as Premium Bonds are an NS&I product, your capital is always secure. They are backed by HM Treasury, meaning your capital is about as safe as it gets.
Overall, Premium Bonds can be a useful haven if you want a secure cash reserve, with the opportunity to benefit from some tax-free winnings that may equate similarly over time to the net interest received on a bank account.
Premium Bonds can be a useful way to save for children
Another, sometimes overlooked, benefit of Premium Bonds is that they can be held by a child under the age of 16. This makes them a useful choice if you want to build up a nest egg for a child, grandchild, niece, or nephew.
Until the child’s 16th birthday, the parent or guardian named on the application looks after the bonds, regardless of who bought them. When the child turns 16, they’ll manage their own bonds.
The nominated parent/guardian will receive confirmation of any prizes won until the child is 16.
If you want to buy Premium Bonds for someone else’s child, you can apply online or by post and request an electronic or paper gift card for you to pass on to the child.
Remember that only the nominated parent or guardian can manage and/or cash in the bonds.
Get in touch
If you’d like to explore whether Premium Bonds might be a good choice for you, please get in touch.
Contact us online or call 020 7400 4700.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The Financial Conduct Authority does not regulate NS&I products.
