What are Premium Bonds and How Do They Work? NS&I Premium Bonds are a type of savings account that you can deposit money into (and withdraw at any time), with the interest rate determined by a monthly prize draw. You buy £1 bonds, and each one has an equal chance of winning, so the more you buy, the better.
Is it possible to lose money using premium bonds?
No, because NS&I is a Treasury-approved and regulated company rather than a bank, your money is completely safe.
Even if you’re a bad luck client who never wins, the money you invest in Premium Bonds is protected. Although not always in terms of money’s true value.
Your money is dwindling in terms of what it can buy unless you win enough to stay up with the rate of inflation, which is currently 0.9 percent.
What is the best method for purchasing premium bonds?
What is the procedure for purchasing Premium Bonds?
- Purchasing anything on the internet. Premium Bonds can be purchased through our safe online system.
- Purchasing through mail. Simply fill out an application and mail it to us along with a check made payable to NS&I.
When do Premium Bonds enter the draw after purchase?
Premium Bonds are eligible for the draw one full calendar month after they are purchased, according to NS&I. If you buy them in November, for example, they’ll be in every draw starting in January.
Overview
Premium Bonds allow you to invest anywhere between £100 and £40,000. Each month, a draw is held, with Premium Bond holders winning roughly £100 million. A £1 million jackpot is the highest prize.
You are not required to report it on your tax return. Premium Bonds can be purchased by anybody over the age of 16, and you can also purchase them on behalf of your kid or grandchild.
How to use this service
To apply, download the PDF application form from the National Savings and Investment website and mail it back to them.
The following link will lead you to a page with an application form and links to more information about how the bonds work. A copy of Adobe Reader is required to access the form.
Is it possible to own more than $50,000 in Premium Bonds?
If it is discovered that Premium Bond winners have invested more money than is allowed, their winnings may be taken away.
The largest amount you may invest in Premium Bonds right now is £50,000, with a minimum contribution of £25.
Premium Bonds are a type of savings product offered by National Savings and Investments (NS&I) that differs from traditional savings accounts in that you earn interest on your money.
Instead, people who invest are entered into a monthly prize draw for a chance to win a tax-free award of between £25 and £1 million.
Is buying Premium Bonds in bulk better?
Q I have £27,000 in premium bonds that were issued in blocks of £2,000 and £1,000, and my winnings have been poor (£600 in the last three years).
Could you kindly tell me whether there is any evidence that holding one entire block rather than having them divided up as they are now would be better? I realize that if this is asked, it can be done, but I will forfeit one month of participation in the drawing.
A There are numerous theories. There is no evidence, however, that owning premium bonds in a single block increases your chances of winning. Otherwise, it would have become well known very quickly.
The R in ERNIE denotes a ‘random’ (Electronic Random Number Indicator Equipment) selection of the winning numbers, which has been the case since the inaugural draw in 1997. Each month, ERNIE is designed to select 2.5 million numbers, which are subsequently matched to 1 million eligible bonds (many of the numbers include bonds not yet sold or those which have been cashed in).
Since the introduction of the national lottery, premium bonds have grown in popularity to the point that total holdings are now about £25 billion, making the odds of winning the single £1 million top prize astronomical. The average payout is set at 3.2 percent net, but this covers all of the rewards given out, implying that the government is borrowing money at a low rate.
The fact that the earnings are tax-free on an investment where you can always get your money back is a major selling point. Unlike the lottery, which is a zero-sum game. You could sell your bonds and then buy them back to cover consecutive numbers. However, as you point out, this will cost you a month in the draw and will not increase your chances of winning. Don’t get too down on yourself. It appears that investors frequently receive nothing or very little for long periods of time before experiencing a run of excellent fortune.
Premium Bonds can be owned jointly.
Some assets (such as a joint bank account) can be owned jointly with another individual, allowing the assets to flow to the survivor owner after the other owner dies. Outside of the estate, other assets can be designated to a beneficiary (such as life insurance). The assets in these cases can be administered without the need for a probate grant.
Premium bonds can’t be held in a joint account with someone else. Furthermore, premium bonds cannot be designated to pass to a beneficiary when the owner passes away. If the entire worth of NS&I items exceeds £5,000, you have no choice but to file for a grant of probate.
What is the procedure for adding funds to my Premium Bonds?
A bank transfer may be the best option for topping up your or your child’s funds on a regular basis. You can set up a standing order with your bank to top up more frequently.
You can usually accomplish this online, over the phone, or in a branch. There’s no need to provide your card information; we’ll update your account once the funds have been received. It normally takes two to three banking days for this to happen.
Premium Bonds, Income Bonds, Direct Saver, Direct ISA, Junior ISA, and Investment Account can all be topped up via bank transfer or standing order.
How many monthly premium bond awards are there?
We divide the awards into three value bands: greater, medium, and lower, and each band receives a percentage of the monthly prize fund.
Higher value band
Every month, we award two £1 million prizes. The remaining prize fund portion allotted to the higher value band is then divided equally among the remaining reward values. We begin by calculating the total number of £100,000 prizes. We carry over any balances that are less than half of the prize amount to the split for the £50,000 awards. Alternatively, if there is a balance of at least half the prize value, we grant an additional £100,000 prize. We accomplish this by deducting the shortfall from the £50,000 prize pool.
The numbers of other awards in this value bracket are then calculated in the same way, from highest to lowest value. Any surplus or shortage is added to or subtracted from the medium value range for computing the number of £5,000 prizes.
Medium value band
We determine the number of prizes based on the share of the prize cash allotted to this band, with one £1,000 reward for every three £500 prizes. Any surplus is transferred to the lower value band’s share.
Lower value band
The amount of lower-value prizes is calculated so that there are equal numbers of £100 and £50 prizes, and the total number of prizes (including £25 prizes) is equal to the number of eligible £1 Bond units divided by the odds.
Prize draw details
The table below displays the projected number of prizes of each value for the February 2022 draw, as well as the volume and value of the individual prizes for the January 2022 draw.