Glossary · UK
What is Premium Bonds?
An NS&I savings product where you win tax-free prizes in a monthly draw instead of earning interest.
Full Definition
Premium Bonds are a savings product from National Savings & Investments (NS&I), backed by HM Treasury, where instead of paying interest your bonds are entered into a monthly prize draw. Each £1 bond has an equal chance of winning, and prizes range from £25 up to two £1 million jackpots every month. The prize fund rate is variable and reviewed regularly; all winnings are completely free of Income Tax and Capital Gains Tax, which makes them attractive to higher-rate taxpayers who have used their Personal Savings Allowance. You can hold between £25 and £50,000, and your capital is 100% secure because it is government-backed (so the £85,000 FSCS limit is not the relevant protection here). The trade-off is that, with average luck, smaller holdings may win nothing, so the effective return can be lower than a standard savings account.