Premium Bonds are a savings product offered by NS&I (National Savings and Investments), a UK government-backed institution. Instead of paying interest, each £1 bond gives you a monthly entry into a prize draw with prizes from £25 to £1,000,000.
The prize fund rate (approximately 4.40% in 2024–25) is not a guaranteed return. In practice, most bond holders receive less than the headline rate — a small number win large prizes that raise the average. The median return is significantly lower than the mean.
Higher-rate (40%) taxpayers whose Personal Savings Allowance is used up — Premium Bond winnings are tax-free and don't count toward the PSA. Those who want 100% government-guaranteed savings. Those who enjoy the lottery element of saving. Maximum holding: £50,000.
Basic-rate taxpayers with savings under £20,000 will almost always receive a better guaranteed return from a Cash ISA or high-interest easy access account. Track your savings with our free savings tracker.