Investing in UK Premium Bonds


In the United Kingdom, Premium Bonds are issued by the government. They are therefore considered a very safe investment. Throughout its long history, the British government has never failed to honour its bond obligations.

As with most investments considered low-risk, UK Premium Bonds are low yield.

Important: UK Premium Bonds do not pay interest. Instead, the bondholder automatically participates in a monthly raffle. If you want to find Bonds that pay interest then you should get an account with a bond broker.


Where do I buy Premium Bonds?

You buy Premium Bonds from NS&I (National Savings and Investments), a state-owned savings bank in the UK. The NS&I offers Premium Bonds and a range of other savings and investments.

You can buy Premium Bonds from the NS&I online, over the phone, by post, or by standing order.

Also, if you have money in another NS&I account, you can use it to purchase Premium Bonds. You fill out a simple form and the switch is carried out for you by the NS&I, so there is no need to withdraw the money from your account if you want to move them into Premium Bonds.

Do I need a big bankroll to invest in Premium Bonds?

No, the smallest possible investment is just £25.

How much can I invest in Premium Bonds?

The upper limit is £50,000 per person.

How much interest is paid on Premium Bonds?

When you invest in Premium Bonds, you will not be paid any interest. The British government does not pay interest in the normal way on their Premium Bonds Instead, they put money in a prize fund, and all Premium Bond holders participate in a monthly raffle.

What are the odds of winning?

For each £1 bond, the odds are 34,500 to 1.

So the more money you invest, the more chances you have in the raffle. Yet, it is also perfectly possible to win even with a very small investment – you just need more luck.

How much money goes into the prize funds?

At the time of writing, the annual prize fund rate is 1%. That means that instead of paying a 1% annual interest on the Premium Bonds, the government pays out that amount of money in the form of prizes.

Each month, over 3 million prizes are paid out to winning Premium Bond holders.

How much can I win?

Prizes range from £25 to £1 million.

Tax-free winnings

All wins on Premium Bonds are tax-free.

What happens if I win?

  • If the prize you have won is smaller than £5,000 the money will be sent to you automatically through your chose payment method.
  • If the prize is £5,000 or more the NS&I may need to contact you first before sending you the money, and you might need to fill out a claim form.

Reinvesting prizes

If you want to, you can elect to reinvest the money you won. This means that it is used to buy more Premium Bonds.

You can set up automatic reinvesting, where any prize you win is automatically reinvested in Premium Bonds. You still get informed of every win and which numbers that won.

Important: The upper limit for Premium Bond investing is £50,000 per person and if you have reached this limit you can not reinvest your winnings.

When can I cash in my Premium Bonds?

You do not need to hold on to your Premium Bonds for a pre-determined time before you can cash them in, because Premium Bonds can be cashed in at any time. So, if something happens and you need money, your savings will not be ”locked in” if you have invested them in Premium Bonds.

Beware of inflation risk

When you decide to cash in your Premium Bond, you will be paid its nominal value – the same amount that it was sold for. This means that over time, inflation can reduce the true value of a Premium Bond. The £25 that you invest today might have much less purchase power when you cash in the bond several years from now, if inflation has been significant.

You should also keep in mind that unless get lucky in the prize draws, the bond will pay you no interest while you own it. (There are other types of bonds available where guaranteed interest payments can compensate for inflation.)