Recent analysis by This is Money has looked at how much you might need to hold in Premium Bonds to win big, and it could be less than you think.
Indeed, one recent winner of £100,000 held just £100 in Premium Bonds. A lucky recipient of the top prize back in 2021, meanwhile, held bonds worth just £1,001, well short of the £50,000 maximum.
Keep reading for your look at what Premium Bonds are, why you might hold them, and how much you might need to scoop the £1,000,000 jackpot.
Premium Bonds have provided risk-free savings for 163 years
Of all the products offered by National Savings & Investments (NS&I) since the founding of the company back in 1861, by far the most popular is Premium Bonds. The bonds are currently held by more than 21 million people, around a third of the UK population.
It’s easy to see why they’re so popular. Your money is safe with NS&I because you’re effectively lending money to the government.
You can save anything from £25 to £50,000, either as one-off payments or via regular standing orders. Not only is NS&I Treasury-backed, so you know your savings are secure, but there’s also the chance of winning huge cash prizes too.
Each Premium Bond you hold is an entry into a prize draw, with monthly winners selected by ERNIE (Electronic Random Number Indicator Equipment). There are three bands of prizes, plus the jackpot, all of which are tax-free:
- Lower value prizes (£25, £50 and £100)
- Medium value (£500 and £1,000)
- Higher value (£5,000, £10,000, £25,000, £50,000, £100,000)
- Jackpot value (£1 million)
You have a 1 in 21,000 chance of winning a monthly prize (4.4% variable).
Past jackpot winners have held as little as £17 in Premium Bond savings
This is Money looked at the Premium Bond prizes dished out over the last four years.
It found that while the average Premium Bond holding is £5,250, the average held by winners of the £1 million jackpot is higher, at £38,779 – much closer to the £50,000 limit.
But don’t let that put you off. A saver from Devon won £1 million back in August 2021 with holdings of just £1,001. And in July 2004, one lucky winner from east London scooped the jackpot with just £17 of Premium Bond savings.
Since May 2020, six jackpot prizes have gone to savers with £10,000 or less.
Premium Bonds are available to those over the age of 16, but you can buy them on behalf of a child. The money will need to be looked after by a parent or guardian until the child reaches age 16, so they could make a great gift for your children or grandchildren.
Premium Bond savings don’t earn interest so you might consider looking elsewhere
While the knowledge that your savings are safe, and the chance of winning the £1 million jackpot are huge draws, there are downsides to Premium Bonds too.
Your savings don’t earn interest so any return you see from your savings will need to be in the form of a cash prize. The effects of inflation, especially over the last couple of years, mean that your holdings will be effectively losing value in real terms.
If you’re looking for competitive interest or investment returns, you might consider looking at an ISA.
Cash ISAs
A Cash ISA works very similarly to a regular savings account. Your money is protected under the Financial Services Compensation Scheme (FSCS). Unlike with Premium Bonds, you earn interest on your savings. With an ISA, that interest is tax-free.
You can currently save up to £20,000 a year into a Cash ISA (for 2024/25), so you could save considerably more than you can hold in Premium Bonds. You must be over 18, but a Junior version is available (see below).
Stocks and Shares ISA
Stocks and Shares ISAs are also tax-efficient. Here, your money is invested in the stock market so there are risks attached, but with the chance of investment gains too.
You’ll need to think very carefully about your attitude to risk and capacity for loss and we’re on hand to help you with this.
The same £20,000 annual subscription limit applies but any investment gains you make are free of Income Tax and Capital Gains Tax (CGT).
Again, you must be over 18 and a UK resident to open a Stocks and Shares ISA but a Junior version is available (see below).
Junior ISA
Junior ISAs (JISAs) are available in Cash, and Stocks and Shares versions, and can be opened on behalf of a child. While the same tax efficiencies apply, the annual limit is less. You can currently contribute £9,000 a year to a JISA.
If you want to save for a child or grandchild while also teaching them about interest and investment return, a JISA might provide the perfect opportunity.
Get in touch
If you’d like to discuss how best to save and invest, for you or a loved one, get in touch. Contact us now to find out how our Chartered financial planners could help you.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.
