The pandemic changed many of the nation’s money habits. According to the Bank of England, on average, UK households were spending less each month, and able to squirrel more away into savings. Whether this trend is here to stay is unclear, but for those who are sticking to their new savings habits, Premium Bonds are a secure, tax-free – and fun – way to save. But what are they?
Premium Bonds give you the chance every month to win cash prizes. Instead of paying interest, your bond numbers are entered into a monthly prize draw for the chance to win prizes from £25 to £1m. With two £1m prizes every month – and some of the other prizes running to thousands of pounds – investing in Premium Bonds can be an exciting way to save.
You can start with £25 – that’s equivalent to just 10 flat whites (and winning gives a bigger buzz)
If you buy a coffee each morning on your daily walk, in two weeks you’ll probably have spent at least £25, the minimum Premium Bonds investment allowable. The maximum investment is £50,000. For each £1 invested, the holder gets a unique bond number. This means a £25 investment would give you 25 chances of winning a prize in the monthly draw. The more numbers you have, the bigger your chances of winning. And, let’s face it, winning gives a bigger buzz than any caffeine high. With the minimum purchase for Premium Bonds now just £25, more people can afford to save a regular monthly amount.
ERNIE draws Premium Bond numbers and was inspired by James Bond
ERNIE is the machine that chooses whose luck is in, generating random winning numbers in the monthly draw. Short for Electronic Random Number Indicator Equipment, ERNIE was originally developed by Bletchley Park codebreakers. ERNIE’s second incarnation, launched in 1973, was modelled on one of the sets from the James Bond film Goldfinger. Today’s ERNIE is the fifth generation of the number-generating machine.
More than 3m prizes, worth between £25 and £1m are currently awarded in the draw
Everyone may dream of winning the top prize of £1m, but hundreds of savers win five- or six-figure payouts. In the year to 6 April 2021, there were 70 Premium Bond prizes of £100,000, more than 141 of £50,000, and more than 703 prizes of £10,000. The odds of each £1 bond number winning are currently 34,500 to one.
A knock on the door could mean a million
Millionaire winners get a face-to-face visit from one of the Agents Million, the NS&I employees whose job it is to announce the biggest Premium Bond prizes. An Agent Million turns up without warning, with ways to identify themselves and bearing the good news. They travel wherever the winner is, whether you live in the farthest reaches of the British Isles or even abroad. But there is no suitcase of cash or a giant cheque. An Agent Million’s role is to break the news discreetly, to arrange financial advice, if desired, and to agree how your winnings are paid. Throughout the coronavirus pandemic, the Agents Million have still found ways to deliver the good news.
Tax-free winnings
If you are lucky enough to be a Premium Bonds prize winner, the good news is that your winnings are tax-free. This means that the amount you win is free from any income or capital gains tax. So everyone who buys Premium Bonds has the chance to win up to £1m and keep all the prize money for themselves.
Premium Bonds as a gift
Parents and grandparents have been buying Premium Bonds for their children for generations. But anyone over 16 now can buy a gift of Premium Bonds for a child under 16, with the parents’ permission. It costs just £25 to start a child on their savings journey.
Alexa, have I won a fortune?
Almost 600,000 bond holders use the NS&I prize checker app each month to check if they have won a prize. And it’s also possible to ask Alexa if you are a winner. Great for those who want to hear a friendly voice announcing if they’ve won that month.
Past prizes worth more than £70m are still waiting to be claimed
Premium Bonds bought in the past or given as gifts can sometimes be forgotten about. In total, more than 1.9m prizes, worth over £70m, are yet to be claimed. Currently five prizes of £100,000 and eight of £50,000 are outstanding. The good news is there is no time limit on claiming a past win, so check if you find an old Premium Bond certificate or a record of bonds bought in the past. Either enter your Premium Bonds holder’s number into the prize checker online or, if you can’t find the holder’s number, write to NS&I with the relevant name, date of birth, address and any known previous addresses.
You can buy online or by phone
Bonds can be bought online via the NS&I website at nsandi.com or by phone. Cashing in Premium Bonds is just as easy. There is no charge to cash in a bond and no notice is necessary to free up your money.
Having something to save towards can make putting money aside easier. With the help of NS&I, you can reach your goal too. Visit nsandi.com to find out how you can save for a sunny day
