Premium Bonds are a popular savings product offered by National Savings and Investments (NS&I) in the UK. With Premium Bonds, instead of earning interest, your bonds are entered into a monthly prize draw where you can win tax-free prizes between £25 and £1 million.
In this article, we’ll look at how often you can expect to win prizes if you hold 50,000 Premium Bonds.
Overview of Premium Bonds
Premium Bonds allow you to invest from £25 up to £50,000. For every £1 you invest, you’ll receive one Premium Bond number which enters you into the monthly prize draws.
The minimum investment is £25 which will buy you 25 bond numbers. The maximum limit is £50,000 which will buy you 50,000 individual bond numbers.
Prize draws are held monthly with over 3 million prizes paid out each month. The prizes range from £25 for smaller prizes up to £1 million for the jackpot.
The prizes are tax-free under current UK law. This makes Premium Bonds an attractive savings option compared to savings accounts which pay taxable interest.
Instead of receiving interest payments, your bonds are entered into the monthly draws. The more bonds you hold, the greater your chance of winning prizes.
Odd of winning with 50,000 Premium Bonds
If you hold the maximum limit of 50,000 Premium Bonds, how often can you expect to win prizes?
With 50,000 bond numbers entered each month, your odds of winning are as follows:
- Odds of winning any prize – 1 in 120
- Odds of winning £25 – 1 in 24,500
- Odds of winning £50 – 1 in 24,500
- Odds of winning £100 – 1 in 24,000
- Odds of winning £1,000 – 1 in 24,000
- Odds of winning £5,000 – 1 in 24,000
- Odds of winning £10,000 – 1 in 120,000
- Odds of winning £25,000 – 1 in 495,000
- Odds of winning £50,000 – 1 in 2,330,000
- Odds of winning £100,000 – 1 in 4,950,000
- Odds of winning £1 million jackpot – 1 in 24,500,000
As you can see, the odds of winning any prize are very good with the maximum hold of 50,000 Premium Bonds. You have a 1 in 120 chance of winning some prize in the monthly draw.
The most common prize is £25 which you’ll have a 1 in 24,500 chance of winning each month. Even the £1,000 and £5,000 prizes you have a 1 in 24,000 chance of winning.
Of course, the odds of winning the jackpot £1 million prize are still over 24 million to one. But the good overall odds of winning something make Premium Bonds popular.
Expected number of prizes
Based on the prize odds, we can calculate how many prizes you can expect to win if you hold 50,000 Premium Bonds.
The expected number of prizes in a year would be:
| Prize | Odds of winning | Expected per year |
|---|---|---|
| £25 | 1 in 24,500 | 2 |
| £50 | 1 in 24,500 | 2 |
| £100 | 1 in 24,000 | 2 |
| £1,000 | 1 in 24,000 | 2 |
| £5,000 | 1 in 24,000 | 2 |
| £10,000 | 1 in 120,000 | 0.4 |
| £25,000 | 1 in 495,000 | 0.1 |
| £50,000 | 1 in 2,330,000 | 0.02 |
| £100,000 | 1 in 4,950,000 | 0.01 |
| £1,000,000 | 1 in 24,500,000 | 0.0004 |
As you can see from the table, over the course of a year you can expect around 10 smaller prizes for £25, £50, £100 along with about 2 prizes of £1,000 or £5,000.
The chances of the larger prizes are still low, but you’d have a reasonable chance of a £10,000 prize every couple of years or so.
Monthly expect prizes
Based on the odds, we can also calculate the number of prizes expected each month if you hold the maximum 50,000 Premium Bonds.
The expected monthly prizes would be:
| Prize | Odds of winning | Expected per month |
|---|---|---|
| £25 | 1 in 24,500 | 0.2 |
| £50 | 1 in 24,500 | 0.2 |
| £100 | 1 in 24,000 | 0.17 |
| £1,000 | 1 in 24,000 | 0.17 |
| £5,000 | 1 in 24,000 | 0.17 |
| £10,000 | 1 in 120,000 | 0.03 |
| £25,000 | 1 in 495,000 | 0.008 |
| £50,000 | 1 in 2,330,000 | 0.002 |
| £100,000 | 1 in 4,950,000 | 0.001 |
| £1,000,000 | 1 in 24,500,000 | 0.00003 |
On average each month, you can expect around 1 prize of £25, £50 or £100. Every 5-6 months or so you would expect a £1,000 or £5,000 win.
But again, the jackpot and larger sums are still unlikely on a monthly basis. But over time your chances improve significantly.
Total expected winnings
Based on the prize frequency, we can calculate the total expected winnings over the course of a year if you hold 50,000 Premium Bonds.
Simply multiply the number of expected prizes per year by the prize amount to get total expected winnings.
| Prize | Expected prizes per year | Total expected winnings |
|---|---|---|
| £25 | 2 | £50 |
| £50 | 2 | £100 |
| £100 | 2 | £200 |
| £1,000 | 2 | £2,000 |
| £5,000 | 2 | £10,000 |
| £10,000 | 0.4 | £4,000 |
| £25,000 | 0.1 | £2,500 |
| £50,000 | 0.02 | £1,000 |
| £100,000 | 0.01 | £1,000 |
| £1,000,000 | 0.0004 | £400 |
| Total | £21,250 |
Based on the odds, over the course of a year you can expect total winnings of around £21,250 if you hold the maximum 50,000 Premium Bonds.
This works out at an effective interest rate of 4.25% on the £50,000 invested. This return beats most savings accounts available today.
Factors that affect your chances of winning
While the prize draw odds published by NS&I give an indication of your chances, there are some other factors that can affect your chances of winning.
Number of other bond holders
Your actual chances of winning depend on the number of other Premium Bonds holders and total bonds entered in each draw. The more bond holders there are, the more your chances are diluted.
As of November 2022, there were over 21 million Premium Bonds holders with over 118 billion eligible bonds. The more Premium Bonds that are in the draw, the lower your individual chances or winning.
Number of prizes available
Your chances also depend on the total number of prizes available in each monthly draw. NS&I guarantees a minimum prize fund which means the number of prizes changes based on interest rates and the total value of bonds.
If interest rates rise, the number of prizes available will also increase as NS&I allocates more money to the prize fund. More overall prizes mean a greater chance for each bond number to win.
Probability and luck
Finally, as with any prize draw, luck pays a big role. The stated odds reflect the mathematical probability, but each month’s actual winners are subject to randomness and luck.
Some months you may win more than expected, other months you may not win at all. But over time as you enter multiple draws, your win frequency should reflect the published odds.
Maximizing your chances of winning
While luck plays a big part, there are some steps you can take to maximize your chances of winning with Premium Bonds:
- Hold the maximum amount – buying the full 50,000 allows you to enter the most bond numbers each month.
- Reinvest your winnings – use any prizes you win to buy more Premium Bonds and increase your holdings.
- Check for unclaimed prizes – make sure you register all bonds and don’t miss out on any prizes won.
- Consider buying for children or grandchildren – you can gift Premium Bonds and share out the prizes.
- Check prize draw results – stay engaged and monitor if you are winning as expected or not.
While there’s no guarantee, following these tips can help improve your odds over time.
Risks of Premium Bonds
While Premium Bonds offer the chance to win tax-free cash prizes, there are some risks to be aware of:
- Your capital is not guaranteed – you could win nothing.
- Winnings are not guaranteed – your actual prizes may differ from estimated amounts.
- Prizes are tax-free for now – future tax rule changes could affect this.
- Interest rates affect prize fund – higher rates mean more prizes.
- You may lose or forget bond numbers – affecting your chances of winning.
- Maximum limit of £50,000 – restricts the number of bonds you can hold.
So while Premium Bonds offer excitement and appeal, they don’t provide the capital guarantees that regular savings accounts do.
Premium Bonds alternatives
If you are looking to maximize your interest but still want a chance to win cash prizes, some alternatives to consider include:
Fixed-rate savings accounts
Fixed savings accounts allow you to lock away money at an agreed interest rate. Your capital is guaranteed so this is lower risk than Premium Bonds.
Prize-linked savings accounts
Some banks offer prize-draw savings accounts which pay monthly prizes as well as a fixed interest rate. This allows you to earn interest and prizes.
Stocks and shares ISAs
Investing in the stock market through an ISA allows your money to potentially grow faster long-term compared to interest rates. But your capital is at risk.
Lottery bonds
These bonds enter you into a lottery-style draw for a chance to win a jackpot. But they tend to have higher charges compared to Premium Bonds.
Each option has different risks and potential returns to weigh up. Spreading your money across accounts can help diversify and reduce risk.
Frequently Asked Questions
Are Premium Bonds worth it?
Premium Bonds can be worth it if you’re looking for tax-free prizes instead of taxable savings interest. The regular chance of winning smaller sums also adds excitement. But ensure you’re comfortable with the risks of not guaranteeing your capital.
Do £50,000 Premium Bonds make sense financially?
Investing the full £50,000 into Premium Bonds can make sense if you’re prepared to have your capital at risk. The estimated return of around 4.25% tax-free tends to beat savings accounts. But there are no guarantees as prize drawings involve luck.
How long would it take to win the jackpot on Premium Bonds?
Based on the odds, it would take an extremely long time to actually win the £1 million Premium Bonds jackpot. Even with 50,000 bonds entered each month, it could take well over 100 years on average to win the top prize.
Can Premium Bonds be a good retirement investment?
Premium Bonds can form part of a balanced retirement portfolio. The tax-free prizes provide an income stream in retirement. But due to the capital risk, most experts advise only having a small portion of your overall retirement savings in Premium Bonds.
Are Premium Bonds safe?
Premium Bonds themselves are very safe in terms of being backed by the UK government via NS&I. However, you can still lose money on them if you don’t win any prizes for long periods. So they do carry investment risk in that regard.
Summary
Premium Bonds allow you to earn tax-free cash prizes instead of regular savings interest. If you hold the maximum of 50,000 bonds, you have good odds for winning smaller £25-£100 prizes regularly along with a reasonable chance of bigger sums.
Over the course of a year with the maximum holdings, you can expect around £21,250 in total winnings. This provides an effective tax-free return of 4.25% on your investment.
So Premium Bonds can form a useful part of your overall savings portfolio. Just be aware they involve luck and do not guarantee your capital like regular savings accounts do.
