Premium Bonds are a savings product issued by National Savings and Investments (NS&I), which is backed by the UK government. Instead of earning interest, bondholders are entered into a monthly prize draw with the chance to win tax-free prizes ranging from £25 to £1 million. Premium Bonds were first introduced in 1956 as an alternative way to save.
Each bond costs £1, and the minimum investment is £25. The maximum amount an individual can hold in Premium Bonds is £50,000. To be eligible for a draw, bonds must be held for a whole calendar month. The odds of winning a prize are 22,000 to 1 for each £1 bond. The annual prize fund rate is 3.6%, but actual returns depend on luck, and it is possible to win nothing. The prize draw is conducted monthly using a random number generator called ERNIE. Premium Bonds are available to UK residents aged 16 and over, while parents or guardians can buy them for children under 16. Premium Bonds can be purchased online, by phone, or by post.
