Changes to Premium Bonds to encourage savers

With interest rates remaining low, savers who want the security of cash and the prospect of higher returns will often ask us about Premium Bonds from National Savings & Investment (NS&I).

Premium Bonds offer holders the chance to win prizes that free of UK Income Tax and Capital Gains Tax.

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Prizes you say?

The prizes are calculated based on an effective interest rate of 1.4%, with the odds of each individual Premium Bond number winning any prize currently 24,500 to 1.

Of course there is no guarantee that your tax-free winnings from Premium Bonds will be equivalent to this effective interest rate; some savers win nothing at all (!), less than the interest rate or much more.

Cash held in Premium Bonds is secure, as it is backed by HM Treasury.


For the first time since Premium Bonds were launched 63 years ago, the minimum investment has been reduced, from £100 to £25.

The change means over 16s can purchase or set up a standing order for a minimum of £25, or gift at least £25 to their children or grandchildren.

It’s a change that follows an announcement made by Chancellor Philip Hammond in the Budget last October.

The lower minimum investment represents part of a package of enhancements made to Premium Bonds, with more changes due to be introduced later this year.

Maximum holding

Despite a reduction in the minimum investment requirement, the maximum holding remains unchanged at £50,000 for each customer.

Premium Bonds are incredibly popular with savers, with around one in three people in the UK holding them.

The tax-free prizes on offer each month range from £25 to £1 million, with each £1 Bond having a separate and equal chance of winning a prize of any value.

Ian Ackerley, Chief Executive at NS&I, said:

“I am delighted that people up and down the country can start a savings habit more easily by investing just £25 in Premium Bonds. Investing in Premium Bonds provides the opportunity to win tax-free prizes, whilst ensuring that your money is 100% secure.

“Lowering the minimum investment on Premium Bonds is part of how we can support a stronger savings culture across the country and help those who want to be able to save little and often, and for those who want to give the gift of savings to their loved ones.”

Striking a balance

Michael Mercieca, CEO of the financial education charity Young Money, commented:

“It is crucial for young people’s futures that they can manage their finances appropriately, and this includes striking a balance between spending and saving. This reduction in the investment threshold enables young people to access this long standing NS&I product more easily.

“Financial education prepares young people for the money-related choices they need to make on a daily basis.  This positive development means Premium Bonds become a relevant choice for many more young people.”

As things stand, parents can open Premium Bonds for their children, and grandparents for their children.

One of the changes due to come into force later this year will allow all adults to purchase Premium Bonds for under 16s. This will mean that they can be gifted to nieces, nephews, godchildren or family friends.

The date for this further change is yet to be announced.