When it comes to personal finance, Money Saving Expert (MSE), the consumer site founded by Martin Lewis, is the go-to destination — and once again, it’s time to listen up.
In its latest newsletter, the MSE team weighed in on Premium Bonds, a popular way to save which offers tax-free ‘winnings’ rather than set interest.
The National Savings and Investments (NS&I) scheme allows people to buy bonds worth £1 each, with a minimum holding of £25 and a maximum of £50,000.
At the end of every month, each bond is then placed into a draw to win tax-free prizes ranging from £25 to £1million.
And while a few lucky folks have become millionaires off the back of their small savings pot, the bottom line is just that: luck.
So although more than 22 million people in the UK have Premium Bonds, according to MSE, ‘most savers’ could actually ‘do better’ putting their cash elsewhere.
Are Premium Bonds worth it?
After stagnating for years, the prize fund rate for NS&I Premium Bonds has been raised twice in recent months, going from 3.3% to 3.8% in June and then up again to 4.35% for September’s draw.
Following the increases, MSE says this option is now ‘closer to top standard easy-access rates of 4.5%’.
However, ‘most people with typical luck’ won’t see the same returns, meaning that they’re ‘still likely to do better with standard savings accounts.’
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‘Many people often think: “I’m likely to get the prize rate (or thereabouts) – and there’s a small chance of winning a million”, but this isn’t correct,’ add the experts. ‘You’re actually likely to get quite a lot less than the headline prize rate (3.8% or 4.35%), and there’s a negligible chance of winning a million.’
There are some caveats though.
If you pay tax on savings and have used up your annual ISA allowance (currently £20,000) MSE claims that the tax-free nature of Premium Bonds means they’re ‘probably a decent choice, if you can accept the random nature of the “interest”.’
The odds also improve as your holding increases, so as Martin previously explained, ‘provided you’re putting a larger amount in (as you need to do that to have a decent chance of winning closer to the published prize rate), they can be a good option.’
In terms of benefits, MSE also notes that since Premium Bonds are backed by NS&I, which is protected by the Treasury, there’s ‘no risk to your capital.’
But there’s no guarantee you’ll win either, so you could effectively ‘earn nothing from putting money’ into Premium Bonds.
The odds of winning with Premium Bonds
Based on the prize breakdown for September 2026, the current odds of winning per £25 of Premium Bonds are:
- £25: 1 in 880 (1,717,659 winners per month)
- £50: 1 in 1,392 (2,366,135 winners per month)
- £100: 1 in 2,734 (2,366,135 winners per month)
- £500: 1 in 75,614 (59,676 winners per month)
- £1,000: 1 in 268,433 (19,892 winners per month)
- £5,000: 1 in 1,789,951 (1,909 winners per month)
- £10,000: 1 in 3,894,128 (954 winners per month)
- £25,000: 1 in 9,462,934 (382 winners per month)
- £50,000: 1 in 22,092,896 (192 winners per month)
- £100,000: 1 in 66,012,507 (95 winners per month)
- £1 million: 1 in 2,739,519,158 (2 winners per month)
If you do fancy trying your luck, you can place up to £50,000 in Premium Bonds completely tax-free, with the average yearly prize rate currently standing at 4.35% (although you could come away with a higher or lower return).
You’ll need to be over the age of 16 to buy them, but it is possible to buy Premium Bonds on behalf of someone below this age, aplacing them under the name of a parent or guardian.
Typically, you’ll need to hold the bonds for a full calendar month before you’re eligible for a win. MSE adds that if you’re moving money over from other savings accounts, you’re best off doing so during the last week of the month.
‘That way you minimise the time the money’s not earning interest and also not in a draw for Premium Bonds,’ the team explains. ‘The exception to this is if you reinvest your prizes — these bonds will be in the draw from the month after you win.’
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