Let’s talk about premium bonds

Premium bonds: what are they and should I buy them?

Premium bonds were introduced by National Savings and Investments (more often known as NS&I) to encourage people to save. They were established in 1956 and are now owned by approximately 23 million people in the UK! You don’t get paid interest, but instead there’s a monthly draw with monetary prizes up for grabs. Those holding premium bonds have the chance of winning the prizes available.

How much can you save?

The way it works is that for every £1 bond you buy; you gain a unique number which effectively has a chance of winning a prize. The more bonds you have, the more chances you have to win. You can hold between £25 – £50,000 in premium bonds. You also need to hold each bond for a full month before it is entered into the monthly draw.

Do I have a guaranteed return?

No, it’s similar to the lottery in that you have a chance to win in the monthly draws but there is no guarantee. You could win anything from £25 – £1,000,000 but the chances of winning the top prizes are potentially low. According to MSE your chances of winning a £25 prize is 1 in 34,500, and 1 in 50,393,319,862 to win the £1,000,000 prize.

It’s worth being aware that any prizes you win on a Premium Bond are free from UK Income Tax and Capital Gains Tax.

Is it safe?

The money invested in premium bonds is safe as it’s fully backed by the government. Most companies offering savings are covered by the FSCS, which protects savings up to £85,000 should that financial institution fall into difficulty. Make sure you check this before you start saving somewhere new. No1 CopperPot Credit Union are covered by the FSCS so you can rest assured your savings are safe (you can only save up to £40,000 with us).

Want to know more?

There’s more information available online if you want to find out more about premium bonds. Essentially, they’re a safe way to save and the more you have, the higher your chances of winning the prizes are. On the other hand, if you want to know you’re definitely going to gain a return on your savings, it might not be for you.

• https://www.moneysavingexpert.com/savings/premium-bonds/
• https://www.nsandi.com/products/premium-bonds
• https://www.which.co.uk/money/savings-and-isas/savings-accounts/national-savings-investments/premium-bonds-a05pg3u3yq0c