How do Premium Bonds work?
NS&I’s Premium Bonds operate differently from typical savings accounts. We look at how they work.
Premium Bonds are one of the country’s most popular savings products, with £135 billion invested in them.
Premium Bonds differ from traditional savings accounts as bondholders are not guaranteed interest payments. Instead, Premium Bonds are entered into a prize draw every month.
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Savers can use NS&I’s prize checker tool from the day after the first working day of the month to check if they have won anything in the prize draw.
How do Premium Bonds work?
NS&I’s Premium Bonds are a savings product backed by the UK government. Their unique appeal is that instead of paying a set interest rate you are rewarded for saving by being entered into a monthly prize draw.
The main difference to traditional savings accounts is that returns aren't guaranteed with Premium Bonds, however, any winnings are tax-free.
The tax-free aspect is something that should appeal to savers who have used all their ISA allowance but are still looking for ways to shield their savings from the taxman.
For each £1 you invest in Premium Bonds, you receive a unique number which represents one chance to win a prize. Every single bond has an equal chance of winning (one in 23,000). This means the more bonds you hold, the greater the chance you will win a prize.
One of the most appealing aspects of Premium Bonds is the security they offer. As the UK government backs them, the investment is considered to be risk-free and the amount you have invested in NS&I is always safe.
How much can you hold in Premium Bonds?
The maximum you can hold in Premium Bonds is £50,000. The minimum is £25. You can buy Premium Bonds through the NS&I website, over the phone or by post.
To apply over the phone, call NS&I for free on 08085 007 007.
To apply by post, print and complete an application form and return it with a cheque payable to NS&I. Further instructions and the application form can be found on the NS&I website.
It is also possible to buy Premium Bonds as a gift for a child. The parent or guardian named on their application looks after the child’s bonds until their 16th birthday, regardless of who bought them.
How much can you get from Premium Bonds?
There is no guaranteed return or regular income with Premium Bonds. Instead, you are entered into a monthly prize draw where you could potentially win between £25 and £1 million.
You may have heard of the prize fund rate. This benchmark is used by NS&I to set how many prizes should be given away every month. The figure represents the rate of return for a bondholder with average luck.
Some people will earn more, especially if they scoop a big prize, while others will win nothing. The prize fund rate shouldn’t be confused with a conventional interest rate that you would see on a typical savings account.
The prize fund rate is currently 3.3% after being cut from 3.6% in April 2026.
This means that the number of high-value prizes has decreased, while the number of lower-value prizes has risen. There will still be two millionaire jackpot winners a month.
In recent history, the prize fund rate reached a high of 4.65% in September 2023, but has been cut six times since. The last time the rate was cut before April 2026 was August 2025.
Before 2023, the rate languished at a low of between 1% and 2% from the financial crisis in 2008 until October 2022.
As well as the prize fund rate, NS&I also publishes the odds of winning. The odds are currently 23,000 to 1 for every £1 bond after being lowered in April 2026 alongside the prize rate.
Are Premium Bonds right for you?
Swapping a guaranteed interest rate for the chance of winning a prize might not appeal to everyone, but Premium Bonds can act as a useful diversifier within a wider portfolio.
Every penny spent on Premium Bonds is backed by the government. For this reason, many investors put considerable amounts into NS&I products.
The tax-free status of the prizes is also appealing for any savers worried about busting their personal savings allowance and having to pay tax on their interest. This is particularly the case for higher-rate and additional-rate taxpayers with large amounts of cash savings.
However, recent data has shown that 62% of people who have Premium Bonds have never won a single prize in the monthly draw, raising questions about whether they are the best place for savers to put their cash.
The research from investment firm Vanguard found that of the 23 million people holding a total of £135.7 billion in Premium Bonds, around 14.3 million have never won a prize.
The asset manager attributed this to 15.1 million having between just £1 and £100 saved, where the probability of winning is extremely low.
To put it simply, if you like the idea of winning big but are also comfortable with winning nothing at all, then Premium Bonds could be right for you. Alternatively, if you want a guaranteed level of interest and the certainty that your savings will stay ahead of inflation, then it’s probably best to avoid them.
How are Premium Bonds prizes drawn?
Much like how lottery balls are drawn from a machine, NS&I has its own computerised random number generator, ERNIE.
This Electronic Random Number Indicator Equipment has generated the numbers used in draws since 1957. ERNIE is currently on its fifth iteration and is more high-tech than ever.
ERNIE 5 is powered by quantum technology, which uses light to run the sums far quicker than a conventional computer. It takes 12 minutes for ERNIE to generate the random numbers for a prize draw.
The prize draw is entirely random with each £1 bond having an equal chance of winning a prize each month.
A spokesperson for NS&I told MoneyWeek that, in order to maintain a fair outcome, the Government Actuary's Department carries out an independent check each month to ensure that the Premium Bonds prize draw is fully random.
How to find if you have won a Premium Bonds prize
Once ERNIE has worked his magic, the winners are notified through a variety of channels. Jackpot winners usually find out through a visit from NS&I’s Agent Million, and winners of the runner-up prizes can usually check the day after the first working day of the month.
Two of the easiest ways to check for Premium Bond prizes are the online NS&I prize checker and the official prize checker app, available on either Android or iOS.
Who is Agent Million?
If you are a £1 million winner, you will get a knock on the door from Agent Million. The elusive millionaire maker is actually one of a number of anonymous NS&I employees whose job is to track down the lucky winners who have scooped the top prize.
Winning that kind of money can be life-changing, and Agent Million is there to ensure the winner has all the information they need to manage their newfound wealth carefully in the days and weeks after the win.
