personal finance

What are Premium Bonds and how do they work?

Young woman talking to man sitting in front smiling

Premium Bonds can be bought online, and there’s even a prize checker app.
Photograph: Luis Alvarez/Getty

While many people may have abandoned new year plans to lose weight or go dry for January, those who set themselves the goal of putting aside more money in 2020 may have had more luck. And for those who are sticking to their savings resolutions, Premium Bonds could be a secure, tax-free – and fun – way to save. But what are they?

Premium Bonds give you the chance to win cash prizes every month. Instead of paying interest, your bond’s numbers are entered into a monthly prize draw for the chance to win prizes from £25 to £1m. With two £1m prizes every month – and some of the other prizes running to thousands of pounds – investing in Premium Bonds can be an exciting way to save.

Young man sitting in coffee shop and using laptop computer

The minimum Premium Bond investment is £25, the equivalent of a week or two’s worth of morning coffees. Photograph: South_agency/Getty Images

You can start with £25 – that’s equivalent to just 10 flat whites (and winning gives a bigger buzz)
If you buy a coffee every morning on the way to work, in two weeks you’ll have probably spent at least £25, the minimum Premium Bond investment allowable. The maximum investment is £50,000. For each £1 invested the holder gets a unique bond number that goes into the prize draw. This means a £25 investment gives the holder 25 chances of getting a prize in the monthly draw. And, let’s face it, winning gives a bigger buzz than any caffeine high. The minimum standing order for Premium Bonds is now just £25, so more people can afford to save a regular monthly amount.

ERNIE draws Premium Bond numbers and was inspired by James Bond
ERNIE is the machine that chooses whose luck is in, generating random winning numbers in the monthly draw. Short for Electronic Random Number Indicator Equipment, ERNIE was originally developed by Bletchley Park codebreakers. ERNIE’s second incarnation, launched in 1973, was modelled on one of the sets from the James Bond film Goldfinger. Today’s ERNIE is the fifth generation of the number-generating machine, which was unveiled last year.

More than 3m prizes, worth between £25 and £1m, are awarded every month
Everyone may dream of winning the top prize of £1m, but hundreds of savers win five- or six-figure payouts. In 2019, there were 66 Premium Bond prizes of £100,000, more than 130 of £50,000, and more than 650 awards of £10,000. From 1 May 2020, the odds of each £1 bond number winning on the Premium Bonds will be 26,000 to one.

A knock on the door could mean a million
Millionaire winners get a face-to-face visit from Agent Million, the NS&I employee whose job it is to announce the biggest Premium Bond prizes. Agent Million turns up without warning, bearing official ID and the good news. They travel wherever the winner is, whether you live in the furthest reaches of the British Isles or even abroad. But there is no suitcase of cash or a giant cheque. Agent Million’s role is to break the news discreetly, to arrange financial advice, if desired, and to agree how your winnings are delivered.

Tax-free winnings
If you are lucky enough to be a Premium Bonds prize winner, the good news is that your winnings are tax-free. This means you won’t have to pay any income tax or capital gains on the amount you win. So everyone who buys Premium Bonds has the chance to win up to £1m and keep all the prize money for themselves.

Portrait of father holding boy’s arms up while playing game on laptop.

Premium Bonds aren’t just for adults – last year a child became a Premium Bond millionaire. Photograph: Guille Faingold/Stocksy United

Premium Bonds as a gift
Parents and grandparents have been buying Premium Bonds for their children for generations. But since August last year, anyone over 16 can now buy a gift of Premium Bonds for a child under 16, with the parents’ permission. It costs just £25 to start a child on their savings journey.

Alexa, have I won a fortune?
About 1.5 million bond holders use the NS&I prize checker app each month to check if they have won a prize. Since last March, it has been possible to ask Alexa if you are a winner. Which is especially helpful for those who otherwise struggle to check results due to physical or visual impairments.

Almost £65m in past prizes are still waiting to be claimed
Premium Bonds bought in the past or given as gifts can sometimes be forgotten about. In total, more than 1.7m prizes, worth almost £65m, are yet to be claimed. Currently, five awards of £100,000 and seven of £50,000 are outstanding. If it turns out that a winner has died, the estate will get the money. The good news is there is no time limit on claiming a past win, so check if you find an old Premium Bond certificate or a record of bonds bought in the past. Either enter your Premium Bonds holder’s number into the prize checker online or, if you can’t find the holder’s number, write to NS&I with the relevant name, date of birth, address and any known previous addresses.

You can buy online or by phone
Bonds can be bought immediately online via the NS&I website at or by phone. Cashing in Premium Bonds is just as easy. There is no charge to cash in a bond and no notice is necessary to free up your money.

Having something to save towards can make putting money aside easier. With the help of NS&I, you can reach your goal too. Visit for more information


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