The short answer
- The prize fund rate is 4.35% and the odds are 21,000 to 1 for each £1 Bond, each month.
- With £10,000, the average is £435 a year, but a typical year brings about £350.
- Prizes are tax-free, which helps higher-rate taxpayers most.
- Your money is 100% backed by HM Treasury.
What Premium Bonds are
Premium Bonds are a savings product from National Savings and Investments (NS&I), which is backed by the Treasury. Each £1 you put in buys one Bond with its own number. Every month, a computer called ERNIE picks winning numbers at random. Instead of interest, you have the chance of a tax-free prize from £25 to £1 million.
You never lose the money you put in, and you can cash in at any time. What you give up is a guaranteed return: your prizes could be more or less than you would earn in a savings account.
The prize fund rate and odds
The prize fund rate is the total value of prizes each year as a percentage of all eligible Bonds. It is 4.35% from the September 2026 draw. The odds are 21,000 to 1, meaning each £1 Bond has a 1 in 21,000 chance of winning in a month. NS&I can change both at any time, usually with notice.
With £10,000 in Bonds, you would expect 5.71 prizes a year on average. With £1,000, you would expect 0.57, so many years would bring nothing at all.
The prize table
| Prize | Number of prizes |
|---|---|
| £1,000,000 | 2 |
| £100,000 | 95 |
| £50,000 | 192 |
| £25,000 | 382 |
| £10,000 | 954 |
| £5,000 | 1,909 |
| £1,000 | 19,892 |
| £500 | 59,676 |
| £100 | 2,366,135 |
| £50 | 2,366,135 |
| £25 | 1,717,659 |
Of the 6.5 million or so prizes each month, 98.7% are £25, £50 or £100. The average prize is about £76.12, but that is pulled up by the rare big prizes. The chance of a particular £1 Bond winning the £1 million jackpot in a given month is roughly 1 in 69 billion.
Average versus typical
The average return includes the tiny chance of a huge prize. Since almost nobody wins one, most holders get less than the average. The calculator simulates 4,000 years of draws to show what a typical (median) year looks like, as well as an unlucky and a lucky one.
- Average prizes: £10,000 × 4.35%£435
- Unlucky year (1 in 10 do worse)£150
- Typical year (median)£350
- Lucky year (1 in 10 do better)£650
Only about 32% of simulated years with £10,000 matched or beat the average of £435.
What different holdings win
| Holding | Average a year | Typical year | Chance of any prize in a year |
|---|---|---|---|
| £1,000 | £44 | £0 | 44% |
| £5,000 | £217 | £175 | 94% |
| £10,000 | £435 | £350 | Almost certain |
| £25,000 | £1,088 | £925 | Almost certain |
| £50,000 | £2,175 | £1,900 | Almost certain |
The bigger your holding, the closer a typical year gets to the average, because you have more chances and the luck evens out. With small holdings, results swing a lot from year to year.
Tax-free prizes
Premium Bond prizes are free of income tax and capital gains tax, and do not count towards your Personal Savings Allowance. Savings interest is taxed once it goes over your allowance: £1,000 for basic-rate taxpayers, £500 for higher-rate, and nothing for additional-rate taxpayers.
| Tax band | Equivalent rate |
|---|---|
| Basic rate (20%) | 5.44% |
| Higher rate (40%) | 7.25% |
| Additional rate (45%) | 7.91% |
These figures compare against the average prize rate, not a typical year. For basic-rate taxpayers whose interest stays within the £1,000 allowance, savings interest is effectively tax-free too, so the tax advantage disappears.
Premium Bonds or a savings account
- Return
- Random prizes, 4.35% on average
- Tax
- Tax-free
- Protection
- 100% Treasury backed
- Access
- Cash in any time, usually within a few working days
- Return
- Guaranteed interest
- Tax
- Taxed above your allowance, unless in an ISA
- Protection
- FSCS up to £120,000 per bank
- Access
- Depends on the account
A cash ISA gives tax-free interest too, with a guaranteed rate. If a cash ISA pays more than your typical Premium Bonds return, it is likely to be the better choice for most people. The calculator compares your holding with any savings rate you enter.
How safe your money is
NS&I is backed by HM Treasury, so every pound in Premium Bonds is protected, however much you hold. Bank and building society savings are protected by the Financial Services Compensation Scheme up to £120,000 per person, per banking licence. For people with large cash sums, this is one reason to use Premium Bonds.
Inflation and Premium Bonds
Your Bonds keep their face value, but not their buying power. With CPI inflation at 3.1% in the year to August 2026, a typical return of 3.5% only just keeps up, and a small holding that wins nothing loses about 3% of its value in a year. The inflation calculator shows the effect over time.
Buying, cashing in and prizes
- Anyone aged 16 or over can buy Bonds, and parents or grandparents can buy for children under 16.
- You can hold from £25 to £50,000.
- New Bonds must be held for one full calendar month before they enter a draw.
- You can have prizes paid to your bank or reinvested in more Bonds automatically, up to the limit.
- Cashing in is free, and there is no penalty, though you lose the chance of prizes in the draw that month.
- Unclaimed prizes can be claimed at any time; NS&I’s prize checker shows any you have missed.
Who they suit
- Higher and additional-rate taxpayers who have used their Personal Savings Allowance and ISA allowance.
- People with large cash sums above the FSCS limit who want full protection.
- Savers who enjoy the chance of a prize and accept a lower typical return in exchange.
They suit basic-rate taxpayers with small holdings less well. A best-buy savings account or cash ISA usually pays more, guaranteed.
Myths about winning
- “Old Bonds win more.” Every eligible Bond has exactly the same chance in each draw.
- “Bonds bought in one go are unlucky.” Numbers are drawn at random; when you bought them makes no difference.
- “I am due a win.” Each draw is independent. A long run without prizes does not make one more likely.
How the calculator works
Prizes are random, so a single formula cannot tell you what you will win. The calculator plays out 4,000 separate years of monthly draws for your holding. In each month, it works out how many of your Bonds win using the 21,000 to 1 odds, then picks each prize’s value from the September 2026 prize table, in proportion to how many of each prize there are.
It then sorts the 4,000 years from worst to best. The middle one is the typical (median) year. The year 10% of the way up is the unlucky case, and the one 90% of the way up is the lucky case. The simulation uses a fixed starting point, so the same holding always gives the same answer, and the figures barely move if the starting point changes.
If you change the prize fund rate, the calculator scales the prizes up or down in proportion. In practice NS&I may change the odds and the prize table instead, but the average return is the same.
Reinvesting prizes
You can choose to have prizes reinvested in more Bonds automatically. Your holding then grows over time, much like interest added to a savings account, until it reaches the £50,000 limit.
- Growing at the 4.35% average£15,308
- Growing at a typical 3.5%£14,106
This is a rough guide, treating prizes as if they were added once a year. In reality, prizes arrive at random times, and reinvested Bonds wait a full month before entering the draw.
Ways people use Premium Bonds
- Part of an emergency fund. Money is safe and can be cashed in within a few working days, though not instantly. Many people keep a month or two of costs in an instant-access account as well.
- A home for cash above the FSCS limit. For example, after selling a house or receiving an inheritance.
- A tax-efficient extra for higher earners. Once the ISA and Personal Savings Allowance are used, tax-free prizes become more valuable.
- A gift. Bonds bought for a child or grandchild can be a lasting present with the chance of a prize.
Premium Bonds for children
Parents and guardians can hold Bonds on behalf of a child under 16, and grandparents and others can buy them as gifts. The parent or guardian looks after the Bonds until the child turns 16, when the child takes control. Prizes are tax-free, so they do not count towards the rule that taxes parents on interest over £100 a year from money they give their children.
Common mistakes
- Expecting the average. Most holders win less than the prize fund rate in a typical year.
- Ignoring better guaranteed rates. If a cash ISA pays more than your typical return, it is usually the better choice.
- Missing prizes. Keep your contact and bank details up to date, and check for unclaimed prizes.
- Holding a tiny amount and hoping for a big win. With £100, you can expect a prize only about once every 17 years.