Every month, savers have the chance to win big prizes as the Premium Bonds winning numbers are announced. There are now 24 million people taking part in the government-backed savings scheme, with more than £127 billion banked. Premium Bonds are an investment product from the National Savings and Investment (NS&I), which is owned by the government. Each month, millions of savers are entered into a prize draw to win cash prizes ranging from £25 to £1 million, with two millionaires made at every draw. Every £1 entered has a 22,000-to-one chance of winning.
The minimum investment is £25, while the maximum is £50,000. These savings don’t accrue interest as with regular bank accounts, but are put up against a random digital prize picker called ‘Ernie’ – the Electronic Random Number Indicator Equipment. The date of this month’s draw is Thursday 1 May 2025, and the results will be released by NS&I the following day.
However, savers should keep their eyes peeled and be realistic about the odds of scooping a prize. From the April 2025 draw onwards, the prize fund rate dipped from 4% to 3.8%, making the likelihood of winning with each £1 Bond now stand at 22,000 to one. Yet, don’t be misled by that prize rate, warns Rezaah Ahmad, CEO of investment platform WiseAlpha. He points out: "The average return is currently 3.8 percent, but this figure is influenced by a small number of big winners. Most bondholders will earn less, with the median return, what someone with average luck might expect, closer to 3.3%.”
Indeed, only about 10% of the payouts in any draw are for the hefty sums, starting from the two £1 million jackpots down to £5,000 handouts. Meanwhile, another 10% of prizes represent mid-tier rewards of £1,000 and £500, leaving a massive 80% for the smaller winnings of £100, £50, and £25. Despite the uncertainty and the possibility of winning nothing, Mr. Ahmad reckons Premium Bonds can still hit the spot for certain savvy savers.
He explains: "For higher-rate taxpayers, Premium Bonds can be particularly appealing. To match a median Premium Bond return of 3.3% after tax, a 40% taxpayer would need a deposit equivalent yield of 5.5%." This means that for those in higher tax brackets, the tax-free nature of Premium Bonds can be an attractive option, especially for those who have maxed out their personal savings allowance and their £20,000 ISA limit.
Despite the allure of winning large sums, the reality is that most participants will find their investment remains unchanged. Analysis by money expert Martin Lewis found that the ‘interest rate’ on Premium Bonds accounts is 4% when all winnings are considered, but notes that most people won’t see anything like this. Many savings accounts in the UK also offer a higher interest rate than this, which will be far more consistent.
The distribution of prizes changes slightly every month. For instance, in January 2025, the results included: two £1 million prizes, 82 prizes of £100,000, 163 prizes of £50,000, and so on, down to the smallest prize of £25, which had 1,803,871 winners. This wide range of prizes keeps many savers hopeful, but it also highlights the slim chances of winning significant amounts.
For those considering alternatives to Premium Bonds, Mr. Ahmad suggests several options that could yield better returns. High-interest savings accounts or fixed-term savings bonds can offer rates over 5%, particularly if savers are prepared to tie up their funds for a year or longer. Cash ISAs present a completely tax-free way to save, as with other ISAs, with no tax due on any interest or investment gains within an ISA wrapper.
Gilts, which are government bonds, can yield attractive returns, potentially offering deposit equivalent yields of 6.22% and even 7.49% for additional rate taxpayers. However, Mr. Ahmad cautions: "Unlike Premium Bonds, access to cash requires sale of the bonds which can be subject to investment platform spreads/fees, and sales may not complete immediately. Further, gilts are investment products whose price can go up or down."
Corporate bonds are another option for savers who want a fixed, higher income over time. These bonds typically offer a set interest rate and mature over several years, and are potentially exempt from capital gains tax under the QCB (Qualifying Corporate Bond) scheme. However, similar to gilts, selling them may involve fees and their price can fluctuate.
As the draw date approaches, many savers will be eagerly checking their bond numbers in hopes of landing a life-changing prize. To check if you’ve won a prize on Premium Bonds, you can visit the NS&I checker on its website or use the NS&I app, which allows savers to check results on the go. While the excitement of winning remains a draw for many, it’s essential to approach Premium Bonds with realistic expectations and a clear understanding of the odds.
In summary, while Premium Bonds can offer a fun and potentially lucrative way to save, they are not without their risks and limitations. Savers should consider their financial goals and explore other savings avenues to ensure they are making the most of their money.
