According to the BBC, more than 22 million people in the UK hold Premium Bonds, with combined savings of about £136 billion.
Rather than earning interest or investment returns, each Premium Bond owner is entered into a prize draw. You have two chances to win a £1 million jackpot each month, but there are also millions of smaller prizes to be won.
What’s more, the prize-fund rate increased in September from 3.8% to 4.35%. This puts Premium Bonds closer to the highest easy-access account rates (up to 5% according to MoneySavingExpert).
But what are your chances of winning, and are there better options out there?
Keep reading to find out.
Your money held in Premium Bonds is safe, but returns aren’t guaranteed
Premium Bonds are issued by National Savings & Investments (NS&I) and are 100% government-backed. This means your money is safe.
Any UK resident over the age of 16 can hold Premium Bonds, and they can also be bought as gifts on behalf of children under 16.
You can save anything between £25 and £50,000 in Premium Bonds (as of 2026/27), and each £1 investment is an entry into the monthly draw. The more Premium Bonds you hold, the more times you are entered in the draw.
There are about 6 million prizes issued each month, including:
- Two winners of the £1 million jackpot
- 80 – 100 winners (approximately) of £100,000
- 150 – 200 winners (approximately) of £50,000
- 300 – 400 winners (approximately) of £25,000
- 800 – 1,000 winners (approximately) of £10,000.
Lower prizes are available (including £5,000, £1,000, and £500) down to just £25, which could be won by as many as 2 million people each month.
Prizes are tax-free, and the prize rate increase to 4.35% means that you now have a 1 in 21,000 chance of a win (per £1 bond, up from 1 in 22,000 in July). But, of course, even with these increased odds, the chances of winning the jackpot remain slim. In fact, the Guardian recently reported that 62% of all Premium Bond holders had never won a prize.
Premium Bonds allow you easy access to your money but are unlikely to be the right choice if you’re looking for guaranteed returns or regular income.
ISAs also offer tax efficiency but with the chance for regular income
If Premium Bonds’ tax-free jackpot is tempting, it might be worth remembering that other savings and investment products have tax efficiencies too.
Cash and Stocks and Shares ISAs are incredibly tax-efficient, although the amount you can contribute each year is capped. For 2026/27, you can contribute up to £20,000 across all ISAs you hold, but the Lifetime ISA (primarily used for pension saving or towards buying a first home) has a lower limit of £4,000.
You don’t pay tax on the interest you earn in a Cash ISA. While savings rates might be lower than the returns you could see from a Stocks and Shares ISA investment, you might find it worth opting for a Regular Saver or a fixed-term ISA to secure a more competitive rate. This gives you certainty over your returns that you won’t get with a Premium Bond (or, for that matter, with a Stocks and Shares ISA).
If you are willing to take on additional risk, you have the chance of greater returns by investing in a Stocks and Shares ISA. Gains are free of both Income Tax and Capital Gains Tax (CGT), but the value of your invested funds can fall as well as rise, so you’ll need to be clear on your attitude to risk and time frames.
It’s also worth noting that some ISA changes are imminent.
From 6 April 2027, the effective subscription limit for a Cash ISA will drop to £12,000 for those under 65. The remaining £8,000 will need to be invested outside of a Cash ISA. From the same date, a 22% flat-rate charge will come into force, payable on interest earned from uninvested cash holdings in non-cash ISAs (such as Stocks and Shares ISAs).
Whether Premium Bonds or ISAs are right for you will depend on your circumstances
How you choose to save or invest your cash will depend on your circumstances and goals. Premium Bonds are safe and easily accessible and might also make an attractive cash gift for your children or grandchildren. Returns – in the form of prize draw wins – are tax-free, but many Premium Bond holders never win, and the odds of winning the jackpot are slim.
ISAs are tax-efficient. Funds in a Cash ISA are generally easily accessible, making them useful for an emergency fund, while Stocks and Shares ISAs offer the chance for competitive returns with added risk. If you’re looking to save or invest on behalf of a child, a Junior ISA is also available (with an annual subscription limit of £9,000).
At Globe IFA, we can help you decide on the right option, so get in touch.
Get in touch
Please email hello@globeifa.co.uk or call us on 020 8891 0711 to discuss how Globe IFA’s expert financial advisors can help you manage your long-term financial plans.
Please note
This article is for general information only and does not constitute advice. The information is aimed at retail clients only.
A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance. The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.
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.
The Financial Conduct Authority does not regulate NS&I products.
