Premium Bonds are the most owned savings product in Britain, and the most misunderstood. The advertised rate is 3.80%, but almost nobody gets 3.80%. Here is what they actually pay, what your odds really are, and the two situations where they genuinely make sense.
Premium Bonds don't pay interest. NS&I takes a prize fund rate, currently 3.80% from the July 2026 draw, and pays it out as monthly prizes instead. Every £1 bond has odds of 22,000 to 1 of winning in each draw.
So the average return is 3.80%. The problem is that "average" includes the two people who win £1 million every month. Averages are a poor guide to what one ordinary person gets when a few winners take an enormous share of the pot.
A better question is the median: line every holder up from unluckiest to luckiest and look at the person in the middle. That is the realistic expectation for one person.
| You hold | Typical year | "Average" year | Nothing all year |
|---|---|---|---|
| £1,000 | £0 | £38 | 58.0% |
| £5,000 | £150 | £190 | 6.5% |
| £10,000 | £300 | £380 | 0.4% |
| £20,000 | £625 | £760 | under 0.1% |
| £50,000 | £1,650 | £1,900 | under 0.1% |
The headline finding: if you hold £1,000 in Premium Bonds, the single most likely outcome for the year is nothing at all, and that happens about 58% of the time. The £38 "average" is real, but you are far more likely to get £0 than £38.
The gap narrows as the holding grows, because more bonds means more draws and the luck evens out. At the £50,000 maximum a typical year pays about £1,650 against a £1,900 average, so the headline rate still overstates the typical result by roughly 13%.
Turn the typical win back into a percentage and you get the rate a typical holder really earns. Then, because Premium Bond prizes are completely tax-free, work out what a taxable savings account would have to pay to match it.
| You hold | Typical rate | Basic rate | Higher rate | Additional |
|---|---|---|---|---|
| £10,000 | 3.00% | 3.75% | 5.00% | 5.45% |
| £20,000 | 3.12% | 3.91% | 5.21% | 5.68% |
| £50,000 | 3.30% | 4.12% | 5.50% | 6.00% |
Read the £50,000 row like this: a typical holder earns 3.30% tax-free, which is worth the same as a savings account paying 5.50% to a higher-rate taxpayer who has already used their Personal Savings Allowance. That is a rate you will struggle to find, and it is the real argument for Premium Bonds.
The catch is in the first three words. A typical holder. There is no guarantee, and the smaller your holding the more likely you land below it.
Here is the comparison that decides it. Take £50,000, a 4.0% easy-access savings account, and assume the Personal Savings Allowance is already used by other savings.
| Your tax rate | 4.0% savings, after tax | Premium Bonds, typical | Winner |
|---|---|---|---|
| Basic (20%) | £1,800 | £1,650 | Savings |
| Higher (40%) | £1,400 | £1,650 | Premium Bonds |
| Additional (45%) | £1,100 | £1,650 | Premium Bonds |
The Personal Savings Allowance is £1,000 for basic-rate taxpayers, £500 for higher-rate and nothing for additional-rate, so the tax bite grows exactly as the allowance shrinks. That is why the answer flips partway down the table.
Free calculatorPut in your holding and see the typical win, the average, your odds each month and the chance of a blank year, using the current NS&I prize allocation.
Open the Premium Bonds calculator →Odds of 22,000 to 1 per £1 bond sound long, and for a single bond they are. But you hold thousands of them, and each one is entered every month.
| You hold | Win something this month | Win nothing all year |
|---|---|---|
| £500 | 2.2% | 76.1% |
| £1,000 | 4.4% | 58.0% |
| £5,000 | 20.3% | 6.5% |
| £10,000 | 36.5% | 0.4% |
| £40,000 | 83.8% | under 0.1% |
| £50,000 | 89.7% | under 0.1% |
And when you do win, temper your expectations. In the July 2026 draw there were 6,226,179 prizes, and 98.8% of them were £25, £50 or £100. The two £1 million jackpots are 0.00003% of all prizes.
The honest summary: Premium Bonds are a decent home for a large cash holding if you pay a lot of tax on savings interest. They are a poor deal for a small holder, and the marketing works precisely because the average sounds so much better than the typical.
It depends almost entirely on how much you hold and what tax you pay on savings. At small holdings they are poor value, because a typical £1,000 holder wins nothing at all in a year. At the £50,000 maximum, a typical year pays about £1,650 tax-free, which beats a 4% savings account for a higher or additional-rate taxpayer but loses to it for a basic-rate taxpayer.
Each £1 bond has odds of 22,000 to 1 in each monthly draw, from the July 2026 draw onwards. Over a whole month that gives roughly a 4.4% chance of winning at least one prize with £1,000 held, 36.5% with £10,000, and 89.7% with the full £50,000.
Prizes run from £25 up to two £1 million jackpots each month. But 98.8% of all prizes are £25, £50 or £100, so if you win, you have almost certainly won a small one. The realistic question is not the jackpot but the typical annual total, which is about £300 on a £10,000 holding.
For a typical holder, less than the 3.80% headline. The typical return works out at about 3.00% on £10,000 and 3.30% on £50,000. Because prizes are tax-free, a 3.30% typical return is worth the same as a 4.12% savings account to a basic-rate taxpayer, 5.50% to a higher-rate taxpayer and 6.00% to an additional-rate taxpayer, once their Personal Savings Allowance is used up.
For most people, no. A savings account pays a guaranteed rate and Premium Bonds do not. They become genuinely competitive when you hold a large amount, pay higher or additional-rate tax, and have already used your Personal Savings Allowance, because the prizes are tax-free.
Not in cash terms. Your capital is 100% backed by HM Treasury and you can cash bonds in at any time for what you put in. You can lose value in real terms, though: if you win little or nothing while inflation runs above zero, your money buys less than it did.
Not financial advice. This is general information about how Premium Bonds work, not a recommendation to buy or sell them. Typical (median) figures are computed from NS&I's published prize allocation for the July 2026 draw using an exact compound-Poisson model, and describe the distribution of outcomes, not your outcome. The prize fund rate, the odds and the prize mix are all variable and NS&I changes them. Tax treatment depends on your circumstances and can change. Sources: NS&I Premium Bonds, NS&I prize allocation, UK tax rates 2026/27.