The Pros and Cons of National Savings Premiums Bonds
Published / Last Updated on 07/11/2025
Premium bonds are a lump sum investment product offer by National Savings and Investments (NS&I). NS&I is backed/underwritten by the UK Treasury meaning your investments are 100% protected and you still have full rights for complaint under the protection of the Financial Ombudsman Service (FOS).
Eligibility
You must be 16 years of age or older and have a UK Bank Account. You can invest personally but also open accounts for children.
Limits
Minimum investment £25 up to a maximum of £50,000 per person. The limit was last increased 2014/2015 from £30,000 to £40,000 and finally £50,000.
Prize Draw Fund
Premiums bonds are a prize draw investment with a stated pay out of 3.8% pa of the fund. In short, the return on the fund is 3.6% (although no doubt the Treasury uses the funds to assist government borrowing (from consumers) and is usually cheaper that borrowing via the Gilt/Bond Auction route. i.e., the Treasury is not ‘borrowing’ money in the usual way you would see reported.
Odds
Each month “Ernie” (Electronic Random Number Indicator Equipment) randomly selects millions of Premium Bond certificate numbers as the winners within the prize fund. The odds of winning a prize are 22,000 to 1. For very £1 in fund. So, if you have the maximum £50,000 invested = 50,000/22,000 = 2.27 prizes per month. At the £25 per prize level, you should win at least £56.75 pm (£681 pa) = is just 1.36% gross but there are chances to win bigger amounts This rate of return may not be the best you can get when compared with other types of savings but there is the chance to win bigger prizes, given the overall payout is 3.8% of the fund.
Prize Bands
|
Prize band |
Prize value |
Estimated November 2025 draw |
|
Higher value (10% of prize fund) |
£1 million |
2 |
|
|
£100,000 |
76 |
|
|
£50,000 |
152 |
|
|
£25,000 |
305 |
|
|
£10,000 |
761 |
|
|
£5,000 |
1,521 |
|
Medium value (10% of prize fund) |
£1,000 |
16,014 |
|
|
£500 |
48,042 |
|
Lower value (80% of prize fund) |
£100 |
1,703,176 |
|
|
£50 |
1,703,176 |
|
|
£25 |
2,593,137 |
|
Total prizes |
|
6,066,362 |
|
Total value |
|
£400,379,825 |
Source: NS&I
Tax Efficient Return
Premium bond payouts are income tax and capital gains tax free. As mentioned, the stated payout from premium bonds is 3.6% per annum, this means the returns are the equivalent to investing in a bank account *in excess of the £500 tax free savings allowance) of:
- 0% Non taxpayer = 3.6% gross AER
- 20% Basic rate taxpayer = 4.5% gross AER
- 40% Basic rate taxpayer = 6.0% gross AER
- 45% Basic rate taxpayer = 6.55% gross AER
How to Invest?
- Visit https://www.nsandi.com/
- Buying online
- By Post
- By Telephone
- By Standing Order
