Are Premium Bonds worth it? Two-thirds of holders have never won a prize
NS&I’s Premium Bonds are popular thanks to the allure of winning in their monthly prize draw, but are they worth it?
Millions of savers may love the prospect of potentially winning a monthly Premium Bonds prize but the vast majority have never actually won a penny from the popular product, data reveals.
Premium Bonds are one of the nation’s most-loved savings products, offering monthly tax-free prizes, including a jackpot worth £1 million, but with the prize rate dropping, it is set to get even harder to win anything.
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Are Premium Bonds worth it?
Premium Bonds remain extremely popular because of the allure of the £1 million jackpot, even though most people don’t win a prize and even fewer will win anywhere near enough to become a millionaire.
In 2025, a total of 71,722,056 prizes were paid out to Premium Bonds holders, worth a combined total of almost £5 billion.
Meanwhile, in the 68 years since they have existed, a total of 803 million Premium Bonds prizes have been drawn, distributing about £39 billion to UK savers.
But a Freedom of Information request by Vanguard shows that these prizes are disproportionately awarded to repeat winners who tend to have a significant amount saved in Premium Bonds, as the more you save, the more likely you are to win.
The research 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 attributes this to 15.1 million having between just £1 and £100 saved, where the probability of winning is extremely low.
But even if you’re saving significant amounts, the dream of winning big is still very slim. The odds were 22,000 to one but are being lengthened to 23,000 to one from April 2026.
This means that, for many people who do not get lucky, Premium Bonds may not be worth it, as the money they hold in them will slowly be eroded by inflation until they win a prize, as NS&I does not pay any interest on Premium Bond balances.
Instead, they could be better off with guaranteed growth on their cash in one of the best savings accounts on the market instead, earning up to 4.5%.
However, while their money would be growing at a consistent rate in a savings account, they would remove their chances of winning up to £1 million in the monthly Premium Bonds prize draw.
Alternatively, a £100 per month investment into the FTSE All World over the past 18 years would have resulted in a Junior ISA of £73,000 today, Vanguard said.
Keeping that £73,000 invested from the age 18 through to 66, without making any additional contributions, could grow into a pot of £1.3 million.
James Norton, head of retirement & investments at Vanguard, said: “The lesson here is the power of long-term investing and compound returns. There are ways you can set yourself up for the best chance of success, without relying on luck.”
Should you put money in Premium Bonds after using up your cash ISA allowance?
The cash ISA limit will be cut to just £12,000 for savers aged under 65 from April 2027, chancellor Rachel Reeves announced in the Autumn Budget.
The change means that savers will no longer be able to put their full £20,000 annual ISA allowance into cash. Instead, to make the most of the tax wrapper, they would need to put the remaining £8,000 into a stocks and shares ISA, assuming they had put £12,000 into a cash ISA.
As the move will limit the amount you can put into a cash ISA, many savers who favour the risk-free nature of cash will be searching for other places to save without having to pay any tax on their savings income.
Premium Bonds could be the answer to this. Customers are able to save up to £50,000 in the savings vehicle, and any prizes they win are entirely tax-free – even the £1 million jackpot.
The obvious downside of putting money in Premium Bonds is that you are not guaranteed to win any prizes.
However, as those who put more money into Premium Bonds are more likely to win prizes, people with a significant amount of money to save each year (such as those who max out their ISA allowance) are more likely to get lucky and win prizes.
It means that, under certain circumstances, Premium Bonds could be worth it if you are a saver with a lot of money who does not want to pay tax on their savings but does not want to invest in stocks and shares.
Should you give a child Premium Bonds?
One of the benefits of Premium Bonds is that you can gift Premium Bonds to your or a loved one’s children.
However, Suter at AJ Bell suggests this may not be the best use of your money as small pots have very low chances of winning.
“Premium Bonds have long been perceived by parents and grandparents as a safe store of a few quid, often gifted when a child is born or for birthdays in the hope that they could be one of the lucky winners of one of the top prizes,” Suter said.
“Unfortunately, unless they are saving large amounts they’re unlikely ever to see that dream become a reality, and may not earn any return whatsoever.”
Those who want to give money towards a child’s future shouldn’t hope for the best with Premium Bonds, Suter suggests. Instead, it may be worth considering opening a Junior ISA and regularly putting money into it to grow.
With a Junior ISA, parents, relatives and friends can invest up to £9,000 a year in either cash or stocks and shares, with the money being in the child’s name.
Like other types of ISAs, any gains or interest earned is tax-free.
Suter said: “A parent who had put just £25 a month into the MSCI World index of global companies 18 years ago when their child was born would be handing them £17,700 on their 18th birthday. In other words, that translates to a meaty annualised return of 10.1%.”
She added that while many people may feel uncomfortable at the prospect of putting money into the stock market for their child, “history shows that over the long term investing, even in something low maintenance such as a global tracker fund, can outpace cash and inflation”.
Suter caveated that this does not mean that everyone should ditch safer assets like bonds, or stop saving in cash. However, she pointed out that as investments in a Junior ISA could be held for as long as 18 years, “there’s less reason for them to hold cash savings”.
“Ultimately, you need to feel comfortable investing on behalf of a child before making the leap, so it’s important to understand what you’re investing in before doing so,” she added.
Premium Bonds prizes range from £25 to £1 million – although there’s no guarantee you’ll win anything at all.
If you win the jackpot, you’ll be paid a visit by ‘Agent Million’ to inform you of your newfound fortune. Meanwhile, other winners can check for Premium Bonds prizes online.
For every £1 you have invested in Premium Bonds, you get one chance to win a prize.
You do not need to pay any tax on the prizes that you win from Premium Bonds holdings, and you can save up to £50,000 in them. The odds of winning will be 23,000 to one per £1 Bond number from April 2026.
There are alternatives to Premium Bonds that have better odds such as the Chip Prize Savings Account where savers could win up to £10,000 or there are prizes worth up to £50,000 with Family Building Society’s Windfall Bond.
