What are Premium Bonds?
Premium Bonds are a type of savings account offered by NS&I, a state-owned savings bank in the UK. They’re a low-risk investment with a chance to win tax-free prizes each month, rather than earning interest on your savings.
Premium Bonds have been a popular savings option in the UK since 1956, with over 21 million people currently holding them. They’re known for their unique prize draw, where a random number generator, known as ERNIE (Electronic Random Number Indicator Equipment), selects winners each month. The concept is simple: you buy £1 bonds, and each bond has an equal chance of winning a prize. The more bonds you hold, the higher your chances of winning.
How to Buy Premium Bonds
You can buy Premium Bonds online, by phone, or by post from NS&I. The minimum investment is £25, and you can buy up to £50,000 worth of bonds per person.
Purchase Options and Requirements
You can purchase Premium Bonds for yourself or as a gift for someone else. To buy, you’ll need to be at least 16 years old and a UK resident. You can pay by debit card, cheque, or transfer from another NS&I account. If you’re buying for a child, you’ll need to be their parent, guardian, or grandparent.
The Prize Draw and Winning Chances
Each month, a random prize draw takes place, with over 3 million prizes worth £90 million up for grabs. The more Bonds you hold, the higher your chances of winning. The odds of winning any prize are 24,500 to 1, with prizes ranging from £25 to £1 million. The Ernie machine, a famous random number generator, is used to generate the winning numbers.
Tax Implications and Benefits
Premium Bond prizes are tax-free, meaning you won’t pay income tax or capital gains tax on your winnings. Additionally, the interest earned on your Bonds isn’t subject to tax either. As a state-owned institution, NS&I is backed by the UK government, providing a 100% guarantee on your savings, making it a low-risk investment option. This security, combined with the potential for tax-free prizes, makes Premium Bonds an attractive choice for many savers.
