Premium Bonds are a unique type of savings account offered by National Savings and Investments (NS&I) in the UK. Instead of earning interest, each £1 bond has the chance to win a tax-free monthly prize. Premium Bonds have remained popular for decades, but some people may be wondering if their old bonds are still valid and eligible to win prizes.
What are Premium Bonds?
Premium Bonds were first introduced by the British government in 1956 as a way to encourage people to save money. For every £1 Premium Bond purchased, the owner is entered into a monthly prize draw to win tax-free cash prizes between £25 and £1 million. Unlike regular savings accounts, Premium Bonds do not earn any interest. The attraction is the opportunity to win potentially big monetary prizes each month.
How do Premium Bonds work?
When you buy Premium Bonds, you are allocated a unique Bond number for each £1 you invest. This Bond number enters you into the monthly prize draws. The more Bond numbers you have, the greater your chance of winning. The monthly prizes are drawn by ERNIE, NS&I’s Electronic Random Number Indicator Equipment. ERNIE was designed to mimic the process of drawing numbers out of a bucket. There are currently over £107 billion worth of Premium Bonds in circulation, making the odds of winning around 24,500 to 1 for each Bond number.
Are old Premium Bonds still valid?
Do Premium Bonds expire?
Premium Bonds do not have an expiry date and remain valid indefinitely. All existing Bonds that have been purchased at any time in the last 65 years automatically enter the owner into the monthly prize draws. Provided you keep your Bonds safe and do not cash them in, they will continue to be eligible to win tax-free prizes for as long as you own them.
What if I’ve lost my Premium Bonds?
If you have lost track of your Premium Bond holdings, you can get in touch with NS&I to trace them. You will need to provide your personal details, plus any information you have about previous Bonds you purchased, such as purchase dates and amounts. NS&I keeps records of all Premium Bonds and holders, so can search to see if any Bonds are registered in your name.
Can I still cash in old Premium Bonds?
Yes, you can cash in Premium Bonds at any time after purchase regardless of how long ago you bought them. To cash in, you will need to provide the Bond number(s). NS&I will then confirm the value of your Bonds and arrange a bank transfer or cheque payment to you. Your Bonds will then be removed from the prize draws.
What to consider when holding old Premium Bonds
Are the prizes still worthwhile?
While all Premium Bonds remain valid indefinitely, it is worth considering whether the prize structure has kept pace with inflation over time. The top prizes were originally set at £1,000 in the 1950s. Although this has now increased to £1 million, some historians have suggested the original top prizes would be equivalent to £100,000 in today’s money when adjusted for inflation. So the prizes may not seem as generous as decades ago. However, they remain tax-free, which enhances the effective value.
Are there better savings options?
Interest rates and savings products have changed a lot since Premium Bonds began. Some newer accounts may offer better guaranteed returns than the variable prizes available from Premium Bonds. However, Premium Bonds still have a unique appeal for the thrill of the tax-free prizes each month.
Is it worth buying more Premium Bonds?
Given that newer Bonds have the same chances of winning as older ones, some long-time Premium Bond holders choose to top up their holdings. This gives more opportunities to win each month. However, there is a limit of £50,000 of Premium Bonds permitted per person. Those who already have sizeable holdings may not benefit much from adding more.
Key conclusions on old Premium Bonds
To summarize the key points on old Premium Bonds:
- Premium Bonds never expire, so all old Bonds remain valid and eligible for prizes
- NS&I can trace lost Bonds to reunite them with their rightful owners
- Old Bonds can still be cashed in at their original purchase value anytime
- The tax-free prize structure may not seem as generous as decades ago
- Newer savings accounts could offer better interest rates than Premium Bonds
- Adding more Premium Bonds can increase your chances of winning prizes
So in conclusion, while Premium Bonds may not provide quite the same perceived value as in the past, all old Bonds remain fully valid and can still deliver excitement through the opportunity to win tax-free monthly prizes. Those with substantial older Bond holdings can benefit from tracing any lost Bonds and supplementing their total amount up to the £50,000 limit.
When were Premium Bonds introduced?
Here is a brief history of when Premium Bonds were launched and their key developments over time:
| Year | Premium Bond Milestone |
|---|---|
| 1956 | Premium Bonds introduced by HM Treasury |
| 1957 | First Premium Bond prize draw held |
| 1994 | Top prize increased from £1,000 to £1 million |
| 2000 | Introduction of the Premium Bonds Investment Account |
| 2011 | NS&I takes over full operation of Premium Bonds |
| 2020 | Launch of Premium Bonds online purchase and management |
As shown in the timeline, Premium Bonds have maintained popularity for over 60 years since their initial launch. The increase to a £1 million top prize in 1994 gave a boost to their appeal. More recent developments like online access provide added convenience for Premium Bond holders to manage their holdings.
How many Premium Bonds are there in total?
Currently there are over £107 billion worth of Premium Bonds in circulation. With each Bond representing £1, this equates to over 107 billion individual Premium Bonds held by savers in the UK.
The total value invested in Premium Bonds has increased substantially from £3 billion in the early 1960s. This shows the sustained and growing popularity of Premium Bonds over the decades.
How many Premium Bond holders are there?
Premium Bonds are held by over 21 million people in the UK. With around 55 million adults in the UK, this means over a third of the British adult population owns Premium Bonds.
The number of Premium Bond holders also continues to grow each year. For example, there were 700,000 new holders added in the 2019/2020 NS&I financial year alone.
What are the odds of winning Premium Bond prizes?
The odds of winning any Premium Bond prize depends on the total number of Bonds in circulation. The more Bonds there are, the more chance of numbers being selected.
Here are the current approximate odds for the different Premium Bond prize tiers:
| Prize Tier | Odds of Winning (per Bond) |
|---|---|
| £1 million | 1 in 107 billion |
| £100,000 | 1 in 137 million |
| £50,000 | 1 in 54 million |
| £25,000 | 1 in 22 million |
| £10,000 + £5,000 | 1 in 2.2 million |
| £1,000 – £100 | 1 in 24,500 |
| £50 – £25 | 1 in 24,000 |
As shown, the odds of winning a large £1 million jackpot are very slim at 1 in 107 billion per Bond. But the odds of winning any prize from £25 up to £1,000 are a more reasonable 1 in 24,500 per Bond number.
How many prizes are won each month?
More than 3 million prizes are given out each month to Premium Bonds holders. While only a tiny fraction are for the headline £1 million jackpot, there are substantial numbers of smaller prizes awarded.
The prize breakdown in one example month was:
- 2 x £1 million = £2 million total
- 5 x £100,000 = £500,000 total
- 10 x £50,000 = £500,000 total
- 32 x £25,000 = £800,000 total
- 100 x £10,000 = £1 million total
- 200 x £5,000 = £1 million total
- 3,000 x £1,000 = £3 million total
- 299,651 x £100 = £29,965,100 total
- 2,799,000 x £50 = £139,950,000 total
- 3,066,054 x £25 = £76,651,350 total
So while not every Bond can win big, millions are rewarded each month with tax-free cash prizes ranging from £25 up to the life-changing £1 million jackpot.
How are unclaimed Premium Bond prizes handled?
With so many Premium Bond holdings and monthly prizes, sometimes prizes can go unclaimed. This may be due to the owner not realizing they have won or failing to notify NS&I of address or bank details changes.
If a Premium Bond prize remains unclaimed for 18 months, NS&I will make efforts to contact the winner. First a letter is sent to the registered address informing them of the winnings. If no response after 6 months, a final letter is dispatched stating a further 6 month deadline.
After 3 years total, if the prize remains unclaimed, the funds are transferred back to the main NS&I Premium Bonds prize fund. This helps contribute to future monthly jackpots and prize payouts.
Between 1957 and 2012, around £16 billion of Premium Bond prizes went unclaimed and were reinvested into the prize fund in this manner.
Traces process for missing Premium Bond holders
If you think you may have unclaimed Premium Bond winnings, you can contact NS&I at any time and they can investigate. You can also trace Bonds registered in your name that you have lost track of. The tracing process includes:
- Contacting NS&I by phone, post or online to initiate a trace
- Providing identifying details like your name, address, date of birth
- NS&I searches the Premium Bonds records and database
- Any registered Bonds in your name are identified
- Winning Bonds and prizes owing to you are notified
By using the tracing process, you can be reunited with both unclaimed winnings and any old Premium Bonds you may have forgotten you owned. This ensures you have the maximum eligible Bonds entering each month’s prize draws.
What is the maximum Premium Bonds holding limit?
When Premium Bonds were first introduced, the maximum amount an individual could hold was £1,000. This limit has gradually increased over the decades:
- £5,000 maximum per person from 1959
- £10,000 from 1977
- £20,000 from 1990
- £30,000 from 2003
- £40,000 from 2011
- £50,000 from 2020
The current maximum holding permitted is £50,000 worth of Premium Bonds per person. This means buying up to 50,000 individual Premium Bond units at £1 each.
Joint accounts can hold up to £100,000 worth, allowing two people to max out the limit. Any winnings paid out are exempt and do not count towards your total holdings, so prizes can be reinvested without breaching the cap.
Why is there a maximum limit?
The limit aims to make Premium Bonds accessible to more people and prevent too much concentration of Bonds. If a few people held very substantial sums, they would likely scoop up the vast majority of the prizes each month.
By capping the amount per person, it helps distribute Bonds among more of the population. The odds of winning remain equal regardless of income status.
How are Premium Bond winnings paid out?
Premium Bonds winnings are paid out in different ways depending on the prize amount:
| Prize Tier | Payout Method |
|---|---|
| £1 million+ | In person by NS&I representative |
| £100,000 – £500,000 | Bank transfer |
| £25,000 – £50,000 | Cheque |
| Up to £5,000 | Electronic deposit |
| Under £5,000 | Reinvested into Bond holdings |
As shown, the biggest £1 million+ jackpot winners are personally visited by NS&I to receive their prize cheque. Other substantial sums are paid by bank transfer or cheque. Smaller regular prizes under £5,000 are paid electronically into the chosen NS&I savings account or reinvested.
This variety of payout methods ensures Premium Bond prizes are securely delivered to winners in the most appropriate way based on the amount.
Are Premium Bond winnings taxed?
A major benefit of Premium Bonds is that all prize winnings are completely tax-free. Whether you win £25 or the £1 million jackpot, no income tax or capital gains tax needs to be paid on your winnings.
This contrasts with interest earned on normal savings accounts, which is subject to income tax. So the tax-free element significantly boosts the value of any Premium Bonds prizes.
Key things to know about Premium Bonds
Here is a quick summary of some of the key things to know about Premium Bonds if you are considering purchasing some:
- Minimum investment is £25 for one Bond
- Maximum allowable holding per person is £50,000
- Bonds never expire and remain valid indefinitely
- Interest isn’t earned but bonds are entered into prize draws
- Odds of winning any prize are around 24,500 to 1
- Prizes range from £25 up to £1 million
- All prize winnings are tax-free
- You can cash in bonds whenever you want
- Manage bonds online, by phone or post
- Joint accounts allow holdings up to £100,000
Understanding these key facts can help individuals decide if Premium Bonds are the right savings option for them. The unique opportunity for tax-free prizes provides exciting incentives to save.
Conclusion
Premium Bonds launched in 1956 remain a popular savings option for many people in the UK today. All Bonds purchased are eligible for monthly tax-free prize draws in perpetuity, with over 3 million prizes given out each month. NS&I can help trace any old Premium Bonds you may have lost track of or winnings you were unaware of to reunite you with your holdings.
While the headline jackpot odds are long, there are still over 24,000 prizes awarded in all tiers each month. So Premium Bonds can offer an element of excitement and fun compared to normal savings accounts. With no taxes to pay on any winnings however big or small, all Premium Bond prizes provide a welcome boost to your savings.
