Savings Accounts
Premium Bonds Explained
4 min read
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Premium Bonds Explained

Premium bonds are a popular savings product offered by the UK government. They offer the chance to win tax-free cash prizes while also providing a safe and secure way to save money. 

In this article, we will cover everything you need to know about premium bonds, including how they work, when they are drawn, and whether they are worth it.

What are premium bonds?

Premium bonds are a type of savings bond issued by the UK government's National Savings and Investments (NS&I). When you purchase premium bonds, your money is pooled together with the money of other investors, and the total amount is used to buy a pool of bonds. 

Each bond has a unique number, and these numbers are entered into a monthly prize draw. The more bonds you have, the more chances you have of winning.

How do premium bonds work?

When you purchase premium bonds, you effectively lend money to the UK government. Instead of earning interest on your investment, you are entered into a monthly prize draw. 

The prize draw is held on the first of every month, and the winners are chosen at random using a computer algorithm. The prizes range from small amounts to life-changing sums of money, and they are all tax-free.

When are premium bonds drawn?

Premium bond draws take place on the first of every month, and the winning numbers are selected using a random number generator. 

The prize fund for each draw is based on the total value of all the premium bonds in circulation, and the odds of winning a prize depend on the number of bonds you have. Here’s the premium bond winner checker.

The results of the draw are usually announced within a few days of the draw taking place, and winners are notified by post.

Are premium bonds worth it?

Whether or not premium bonds are worth it depends on your personal circumstances and financial goals. Premium bonds are a safe and secure way to save money, and they offer the chance to win tax-free cash prizes. 

However, the odds of winning a prize are relatively low, and the returns are not guaranteed. If you are looking for consistent returns, there are other products available that may be more suitable, such as an instant access savings account.

What’s The Chip Prize Savings Account?

The Chip Prize Savings Account is not a premium bond. Whilst premium bonds are backed by HM treasury, deposits made into the Chip Prize Savings Account are FSCS eligible (up to £85,000).

With the Chip PSA, you can win up to £35k in prizes, with a grand prize of £10,000 and 1,300 smaller cash prizes. The prize draw typically takes place in the first 7 working days of the following month.

Unlike NS&I premium bonds where withdrawals can sometimes take 6 days, the Chip Prize Savings Accounts allow you to withdraw almost instantaneously. 

T&Cs, eligibility criteria and minimum balances apply. For current prize values, entry and eligibility criteria and how to opt-out see our full terms.

Premium Bonds Summary

In summary, premium bonds are a type of savings bond offered by the UK government. They provide a safe and secure way to save money while also offering the chance to win tax-free cash prizes. 

While they may not be suitable for everyone, premium bonds can be a fun and exciting way to save money and could be a good option for those looking for a safe and secure way to invest their money.

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