18 September 2025
general
As of March 2025, an astonishing £130 billion was being held in Premium Bonds accounts, according to BBC News figures.
But with National Savings & Investments (NS&I) cutting its prize fund rate to 3.6% in August 2025, some of the 23 million people with money in Premium Bonds may be starting to question whether their money would be better saved or invested elsewhere.
According to NS&I, Premium Bond holders won almost 71 million prizes in 2024. However, the odds of winning the jackpot could be far slimmer than you might think.
Read on to learn more about how Premium Bonds work, how likely account holders are to get a positive return, and what alternatives are available for growing your wealth.
Premium Bond holders are entered into a monthly prize draw
Issued by NS&I, a savings bank operated by the UK government, Premium Bonds offer the chance to win monthly cash prizes – using Electronic Random Number Indicator Equipment (Ernie) to select the winners.
Each month, prizes range from two £1 million jackpots to just £25. According to NS&I, the bank has paid out prizes worth a total of around £37.9 billion since the first draw in June 1957.
However, with some bonds being held for almost 70 years, many Premium Bond holders may have lost their paper certificates. As a result, BBC News reports that around £103 million in prizes remains unclaimed.
Your odds of winning are determined by your Premium Bonds’ value
Not every Premium Bond holder shares the same likelihood of winning a prize. NS&I states the odds of winning are 22,000 to 1, with each £1 bond being one entry into the prize draw.
So, in theory, someone with £250 in Premium Bonds is 10 times more likely to win than someone with the minimum of £25.
According to a Freedom of Information (FOI) request by AJ Bell, the average Premium Bonds holding was £5,406 in 2024. However, of the 5.1 million winners over a 12-month period, the average holding size was £23,397.
Furthermore, there are 14.4 million Premium Bond holders who have never won a prize.
Most of the prizes are low in value
For those who strike lucky and win a prize, the chances are it’ll be for a fairly low amount.
According to NS&I, in August 2025, holders won more than 6 million prizes, but almost 99% of them were worth £100 or less. Fewer than 0.05% of the prizes were for £5,000 or more.
Savings are deemed secure and winnings are tax-free
Premium Bonds can be an attractive option for savers for two primary reasons.
1. Security
NS&I claims to be the only savings provider offering security for 100% of savings. As the scheme is run by the government, Premium Bonds are generally deemed a safe place to store savings – without the risk of banks and other account providers going out of business.
However, the Financial Services Compensation Scheme (FSCS) covers each person for savings of up to £85,000 per financial institution. So, you can generally claim back any money saved with a non-government institution if it fails.
For savings exceeding £85,000, a financial adviser can help you determine how to spread your funds across multiple accounts to keep you below the FSCS threshold.
Read more: The art of “laddering” and how it could help boost your income in retirement
2. Tax efficiency
Any prizes won through Premium Bonds are awarded tax-free. By comparison, interest earned through saving can be liable for Income Tax once the Personal Savings Allowance (PSA) has been exceeded.
In the 2025/26 tax year, the PSA is as follows:
As a result, the possibility of growing your savings tax-free could be particularly attractive to higher- and additional-rate taxpayers.
However, the zero-rate of tax for Premium Bond prizes does not necessarily make it the most tax-efficient – or lucrative – way to grow your wealth. A financial adviser can help you identify the most tax-efficient options for your needs and circumstances.
Savings and investment accounts may offer greater returns than Premium Bonds
With the vast majority of Premium Bond holders never winning a substantial prize, your money may be more likely to deliver reliable returns through a savings or investment account.
Here’s how the average Premium Bonds holding value of £5,406 could potentially have grown through a savings or investment account over a period of 10 years.
Saving
According to Bank of England (BoE) data, over the last 10 years, the average base rate of interest has been just shy of 2.5%. So, someone who saved £5,406, with compounding interest averaging at 2.5% over a 10-year period, could have accrued around £1,510 in interest.
However, with many savings accounts paying interest above the base rate, interest earnings could potentially have been even higher. Indeed, according to MoneyWeek, the top easy access savings rate was 4.75% in September 2025.
Investing
According to AJ Bell, an investment of £5,406 in the Fidelity Index World global tracker fund would have grown to £14,794 over the past 10 years.
While historic stock market trends are not a predictor of future performance, in general, long-term investors continue to see their share values trend upwards. So, while investing in the stock market always carries the risk of making a loss, you could potentially see higher gains in future by investing in equities, rather than Premium Bonds.
Some Premium Bonds have been held for decades, often given as childhood gifts or passed down through generations. For the 14.4 million current Premium Bond holders who have never won a prize, that wealth could potentially have grown far more through saving or investing instead.
Get in touch
If you’re looking to grow your wealth, our financial advisers can help you create a plan tailored to your needs and circumstances. Email enquiries@jesellars.co.uk or call 01934 875 919 to find out more about how we can help you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
All information is correct at the time of writing and is subject to change in the future.
Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.
The Financial Conduct Authority does not regulate tax planning.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.
Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
The Financial Conduct Authority does not regulate NS&I products.
