What are the actual odds of winning with Premium Bonds?

Full answer

Premium Bonds work as a lottery-style savings product where, instead of guaranteed interest, NS&I allocates a prize fund each month and enters every eligible £1 bond unit into a monthly draw, with prizes ranging from £25 up to two tax-free £1 million jackpots. **How odds per bond work** NS&I publishes an odds figure (for example, expressed as odds of roughly 1 in several thousand per £1 bond, per monthly draw) that applies equally to every individual £1 bond unit, regardless of who holds it or how long they have held it -- a person holding 1,000 bonds simply has 1,000 separate chances in that month's draw compared with someone holding 1 bond. **The 'prize fund rate' is not the same as guaranteed interest** NS&I describes an annual prize fund rate (an average, expected return across all bondholders if the prize fund were spread evenly), but this is fundamentally different from a savings account's guaranteed interest rate -- most bondholders will receive LESS than the average prize fund rate in prizes over a given year, some will receive nothing at all, and a small number will win considerably more, since prizes are randomly distributed, not proportionally guaranteed. **Worked example** Two savers each hold Premium Bonds: one holds £1,000, the other holds £50,000. Over a year, the larger holder has a much higher statistical likelihood of winning at least something (because they have 50 times as many individual bond entries into each draw), but there is no guarantee either saver wins anything in a given month, or even a given year, since the process is random. **Tax-free, but not the best expected return for large sums** All Premium Bond prizes are entirely tax-free, which can be genuinely valuable for additional-rate taxpayers who have used up their savings allowance, but for savers wanting a predictable, guaranteed return, a fixed-rate savings account or bond may produce a more reliable outcome than the random distribution of Premium Bond prizes. **Practical tip** Treat Premium Bonds as a tax-free, capital-secure alternative to cash savings with lottery-style upside, not as a guaranteed-interest product, and compare the published prize fund rate against current fixed-rate savings deals to judge whether the trade-off suits your risk appetite.

Try the calculator

More answers

• How do regular saver accounts work and are they worth it?