Premium Bonds explained by Love Your Postcode™ [ 2019 guide ]
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Premium bonds explained by Love Your Postcode [ 2019 guide ]


What are Premium Bonds? A Premium Bond is a lottery bond issued by the United Kingdom government’s National Savings and Investments agency.

In this article we’ll tell you everything you need to know about this type of investment product so that you can evaluate if a premium bond would be a perfect product for you.

What are Premium Bonds

Premium Bonds are an investment product issued by National Savings and Investment (NS&I). The bonds are entered in a monthly prize draw and the government promises to buy them back, on request, for their original price.

Interest is paid into a fund from which a monthly lottery distributes tax-free prizes to bondholders whose numbers are selected randomly. The machine that generates numbers is ERNIE, for Electronic Random Number Indicator Equipment. Prizes range from £25 to £1,000,000. Between 2005 and 2009, there were two £1m prizes each month and the minimum prize was £50, but prizes were reduced after the 2009 drop in interest rates. A second £1m prize was reintroduced in August 2014.

how to buy Premium bonds

How to buy Premium Bonds

You can buy Premium Bonds directly from NS&I online by registering on their website, by phone, by bank transfer or through the post. If you already hold premium bonds, you’ll be asked for your holder’s number. If you’ve never invested before, NS&I will check your identity and address.

Each investment must be at least £25. You can only invest amounts in whole pounds. The maximum investment is £50,000, any numbers over £50,000 won’t be eligible to win prizes. If these numbers win prizes in error, NS&I has the right the reclaim the prize.

how to sell Premium bonds

How to sell Premium Bonds

You can cash in your Premium Bonds at any time without penalty through the website if you’ve already registered, by downloading a Premium Bonds Cashing in form and posting it to NS&I or by requesting the form by telephone. According to NS&I, it takes up to 8 working days for the money to reach your account, unless you have elected to cash in after the next draw.

Are Premium Bonds safe and secure

Are Premium Bonds safe and secure?

Your money is secure since Premium Bonds are fully backed by the government. NS&I voluntarily works within the spirit of the Financial Conduct Authority guidelines.

Who is suitable for Premium bonds

Who is suitable for Premium Bonds?

  • Clients wanting the chance every month to win a £1 million jackpot and other tax-free prizes
  • Clients wanting to make the most of tax-free investment opportunities
  • Clients that have £25 or more to invest
  • Clients who want 100% security for their money
  • Clients who want to buy them as a gift, for their child, grandchild or great-grandchild

Who is not suitable for Premium bonds

Who is this not suitable for?

  • Clients wanting a regular income from their savings
  • Clients who are looking for guaranteed returns
  • Clients who are concerned about inflation eroding the value of their savings

Premium Bonds don’t pay any interest.


Premium Bonds don’t pay any interest. Instead, your Bonds enter a monthly prize draw for a chance to win tax-free prizes. Remember that inflation can reduce the true value of your money over time. Any prizes you win are completely free of UK Income Tax and Capital Gains Tax.

Premium bonds for your child

Premium bonds for your child

Premium Bonds can make a special gift for your child, grandchild or great-grandchild. Until the child’s 16th birthday the parent or guardian nominated on the application looks after the Bonds, regardless of who buys them. National Savings and Investment will send you the confirmation of any transactions made, prizes won and payment for cashed in Bonds to the nominated parent or guardian until the child is 16.

Buying for your grandchild

Grandparents and great-grandparents can apply online or by post. You can ask National Savings and Investment to send you an electronic or paper gift card for you to pass on to the child. They also will send you an acknowledgment of your investment. But only the nominated parent or guardian will be able to manage and cash in the Bonds.

Before you apply, please make sure they are happy to look after the investment for the child and agree to give to National Savings and Investment their details. They will check the identity and address of everyone named on your application, and they may need to ask for documents to prove this.

Buying for your child

Parents or legal guardians can apply online, by phone or by post. If your child already has some Premium Bonds and you want to buy some more online or by phone, you’ll need to be registered first. This could take a few days while National Savings and Investment will set up your registration.

The prize draw

The prize draw

National Savings and Investment will pay out over three million prizes every month to lucky Bondholders whose numbers are generated completely at random. Prizes range from £25 to £1 million and are all tax-free. You can choose one of two ways to receive your prizes:

  1. Direct to your bank account with notification by email
  2. Automatically reinvest into more Premium Bonds

For a prize of £5,000 or more, National Savings and Investment may need to check with you first before paying it.

Invest with us

Love Your Postcode has become one of the top estate & lettings agents because of how our group pays attention to each client. With us, you’re guaranteed a trusted partner that know property prices in your area better than anyone and employs experienced staff that anticipates your every need. If you want to invest, sell or buy properties, contact our teams today, call us on 0800 862 0870 or book your online valuation.

Premium bonds explained by Love Your Postcode [ 2019 guide ]
By David Price