If you’re looking for a low-risk way to save money – with a bit of excitement thrown in – Premium Bonds might sound like a winner. They’ve been around since 1956 and are still one of the UK’s most popular savings products. But are they really a good investment, or just a government-endorsed lottery in disguise?
Let’s break it down.
The big appeal is safety and simplicity.
Premium Bonds are issued by NS&I and backed by HM Treasury, so your money is completely safe. You won’t lose a penny of what you put in – even if you never win a prize. Instead of paying interest, NS&I holds a monthly prize draw with tax-free prizes ranging from £25 all the way up to a staggering £1 million.
The odds of winning are currently 1 in 21,000 per £1 bond per month, and you can hold up to £50,000. There are two £1 million jackpots up for grabs every month, and in May 2025 alone, more than 5.9 million tax-free prizes were paid out. Someone’s even won the million-pound prize with just a £17 holding – talk about luck!
But let’s talk about the drawbacks.
While the average annual prize rate has just been revised downwards to 3.60% (it was 4.40% previously), this is just a statistical average. In reality, around half of bondholders earn nothing in a given year. So although your money is safe, it may not be working very hard for you, especially when inflation is eating away at your purchasing power.
If you’re looking for steady, guaranteed returns, a high-interest savings account or fixed-rate ISA might be a better bet. And if you’re comfortable taking more risk, investing in stocks and shares may offer better long-term growth.
So who are Premium Bonds good for?
They’re ideal if you want a safe, flexible place to park your money – with the added excitement of potentially winning big. There’s no age limit, so they’re also a popular gift for children or grandchildren. And for higher-rate taxpayers, the tax-free nature of the prizes makes them particularly attractive.
In summary: Premium Bonds aren’t a guaranteed money-maker, but they can be a fun and safe part of your overall savings strategy. Just don’t rely on them to fund your retirement – unless you’re incredibly lucky!
As with most things in finance, it’s all about balance. And maybe, just maybe, the thrill of checking your prize results each month will bring a little joy – even if it’s only another £25 win.
