Premium Bonds are a popular way for UK residents to save money while having the chance to win cash prizes each month. Unlike regular savings accounts, Premium Bonds don’t pay interest – instead, each £1 bond you buy is entered into a monthly prize draw where you could win between £25 and £1 million tax-free. But what is the minimum amount you need to buy to get started with Premium Bonds?
What are Premium Bonds?
Premium Bonds are issued by National Savings and Investments (NS&I), which is backed by HM Treasury. When you buy Premium Bonds, you are effectively lending money to the UK government. In return, rather than earning interest, each £1 bond you own is entered into a prize draw each month.
There are currently over 3 million prizes given out each month, worth between £25 and £1 million. The £1 million jackpot prize is drawn randomly and won by just two lucky Premium Bonds holders each month. Aside from the jackpot, there are six other prize tiers:
| Prize Tier | Prize Amount |
|---|---|
| 1 | £1 million |
| 2 | £100,000 |
| 3 | £50,000 |
| 4 | £25,000 |
| 5 | £10,000 |
| 6 | £5,000 |
| 7 | £1,000 |
| 8 | £500 |
| 9 | £100 |
| 10 | £50 |
| 11 | £25 |
The more Premium Bonds you hold, the more chances you have each month of winning one of the tax-free cash prizes.
What is the minimum amount you can buy?
When Premium Bonds were first introduced back in 1956, the minimum investment amount was just £1. Today, you can still buy Premium Bonds for as little as £25.
Here are the minimum purchase amounts to be aware of:
- You need a minimum of £25 to get started with Premium Bonds
- After your initial purchase, you can top up your Premium Bonds in increments of £25
- The minimum operating balance is £25 – if your Premium Bonds are worth less than this, they will cease to be entered into the prize draws
- The maximum holding limit is £50,000 per person
So provided you invest at least £25 to begin with, you can become a Premium Bond holder.
Why £25?
The £25 minimum purchase amount has been in place since 2003. Prior to this, the minimum amount was £100 between 1982 and 2003.
The main reasons for having a £25 minimum are:
- To make Premium Bonds accessible to as many people as possible
- To cover NS&I’s administrative costs of managing each bond holding
- To discourage very small holdings that have little chance of winning
By striking a balance between accessibility and making the prize draws administratively manageable, the £25 minimum aims to allow anyone to start investing in Premium Bonds while avoiding the complications of maintaining thousands of very small holdings.
Can you buy less than £25 of Premium Bonds?
Unfortunately, there is no way to purchase less than £25 worth of Premium Bonds in a single transaction. The £25 minimum applies whether you buy online, by phone, by post or in person at a Post Office.
However, there are a couple of ways you could potentially buy Premium Bonds for less than £25:
- Save up small amounts over time until you have £25, then make your first Premium Bond purchase
- Ask friends or family to gift you some Premium Bonds for your birthday or other occasion
- Use cashback rewards from your credit or debit card to accumulate £25
While you won’t immediately have £25 to invest, using one of these methods means you can slowly build up to meeting the minimum amount.
Can children buy Premium Bonds?
Children under the age of 16 aren’t allowed to buy Premium Bonds in their own name. Instead, an adult can purchase them as a gift for a child. The bonds will be registered in the child’s name but managed by the adult until the child turns 16.
There are a few rules around buying Premium Bonds for children:
- You need to buy at least £25 worth to meet the minimum amount
- You can buy up to £50,000 worth in the child’s name
- The total holdings limit of £50,000 applies per person, so this is separate from any bonds you own
- The child can’t access the bonds until they are 16, so you’ll manage them on the child’s behalf
Buying Premium Bonds as a long-term gift for a child can be a great way to give them a head start on saving while also having the excitement of the monthly prize draws.
Should you buy the minimum amount?
For those looking to get started with Premium Bonds, buying the £25 minimum amount is a simple and affordable way to enter the prize draws each month. However, there are some disadvantages to only buying the bare minimum of Premium Bonds:
- Your chances of winning any prize are extremely low with just £25 worth of bonds. The more you invest, the higher your odds.
- It will take a very long time to accumulate winnings. With few bonds, winning anything more than a small £25 prize is unlikely.
- It doesn’t give you much flexibility to withdraw funds if needed. You can only cash in whole bonds in £1 increments.
Balancing these factors, most experts suggest aiming to buy at least £500 to £1,000 worth of Premium Bonds when starting out. This gives you a reasonable chance to win while building up a reserve of bonds you can dip into if required.
Benefits of buying more than the minimum amount
Here are some of the main upsides of buying more than £25 of Premium Bonds:
- Increased odds of winning – your chances of winning rise proportionally to the number of £1 bonds you own.
- Higher value prizes – the more bonds you have, the greater your odds of scooping one of the larger value prizes.
- Easier to cash in part of your holdings – with hundreds of bonds you can withdraw a portion while keeping the rest invested.
- Your investment grows quicker – regular prizes compound to grow your total holdings faster over time when reinvested.
Investing more than the bare minimum amount required allows your Premium Bonds investment to work harder for you both in terms of winning prizes and accumulating savings.
Maximum amount you can buy
At the other end of the scale, there is also a limit on how many Premium Bonds you can own:
- The maximum holding for any individual person is £50,000 worth of Premium Bonds
- This applies to bonds registered in your own name only – any bonds owned on behalf of children are separate
- If your winnings take you over the £50,000 limit, you can either cash in the excess or reinvest it in other NS&I accounts
The cap is in place to allow as many people as possible to own Premium Bonds. It also discourages using them solely as an investment vehicle for wealthier savers who have other alternatives.
However, since the average Premium Bond holding is around £3,000, the vast majority of investors aren’t affected by the upper limit.
Do joint bond holders have a higher limit?
If you own Premium Bonds jointly with a partner, spouse or relative, then you benefit from a combined holding limit.
The rules for joint Premium Bond holdings are:
- Joint accounts can hold up to £100,000 worth of Premium Bonds
- This limit applies across both people, not each
- Any bonds owned solely in your own name still count towards your £50,000 personal limit
So for a couple buying Premium Bonds together, they could own up to £100,000 jointly while each partner holds up to £50,000 separately in their sole names.
One thing to note is that joint holders are not allowed to pool together with any other individuals. The only permitted joint holdings are between two named people.
Can trusts or organizations buy Premium Bonds?
In addition to individuals buying for themselves or as gifts, Premium Bonds can be purchased by some types of groups and organizations:
- Trusts registered in the UK can buy up to £50,000 worth of Premium Bonds
- Organizations like companies, clubs and societies can own up to £50,000
- Charities registered in the UK have a higher £500,000 purchase limit
In all cases, the organization will need to nominate a representative to manage the Bonds on their behalf and act as the point of contact. Otherwise, trusts and groups can buy Premium Bonds in the same way as individual savers.
So getting started with the £25 minimum amount is an option for trusts and organizations too.
Can I split the minimum amount across funds?
If you want to hold Premium Bonds as part of a diversified range of NS&I accounts, one option is splitting your £25 minimum purchase across products.
For example, you could buy:
- £10 worth of Premium Bonds
- £10 into an Investment Account
- £5 into a Direct Saver account
This approach helps you minimize risk by not having all your savings in Premium Bonds which depend on winning prizes.
However, there are downsides to splitting the minimum this way:
- You won’t be eligible to win any prizes with only £10 of Premium Bonds
- Other NS&I accounts have their own minimum amounts you must meet
- It takes longer to consolidate your savings in one place
Realistically, you need at least £25 in each type of NS&I account to benefit from what they offer. Splitting the minimum amount across multiple products often causes more problems than it solves.
What are the alternatives to Premium Bonds?
For those who want to start saving but don’t meet the £25 minimum purchase amount for Premium Bonds, there are a few options:
Easy Access Savings
The simplest alternative is an easy access savings account with a low minimum opening balance. Many banks and building societies offer accounts you can open with just £1 initially.
While you won’t have the excitement of winning prizes, easy access savings provide a safe place to deposit small sums of cash and earn modest interest. Top picks often include nationwide brands like HSBC, NatWest, Santander and Barclays due to their customer service and convenience.
Cash ISAs
If you want tax-free savings like Premium Bonds, one option is starting a Cash ISA (Individual Savings Account). The minimum opening balance for Cash ISAs can be anywhere from £1 up to £500.
Interest rates are extremely low right now, but your savings still grow tax-free. When you have more cash to deposit, ISAs tend to offer much higher limits than Premium Bonds.
Innovative Finance ISAs
Willing to take on some extra risk for higher potential returns? Innovative Finance ISAs allow you to invest in peer-to-peer lending and crowdfunding projects. Minimum investments start around £100.
By lending to individuals and businesses, you can earn up to 7% tax-free – far more than typical savings rates. However, these are not FSCS protected and carry a risk of default.
Lifetime ISAs
If you’re saving for your first home or retirement, Lifetime ISAs offer a 25% government bonus on contributions up to £4,000 a year. You need to be able to put away between £100 and £250 each month to start.
Lifetime ISAs suit long-term goals like buying a home or retirement investing. The bonus definitely makes it worth looking into if you have an appropriate savings horizon.
Key Takeaways
– The minimum amount of Premium Bonds you can buy is £25
– This minimum purchase allows anyone to enter the prize draws
– You need at least £25 for your bonds to remain eligible for prizes
– Buying above the minimum gives you better odds and prize potential
– The maximum holding for an individual is £50,000 worth of bonds
– Alternatives like easy access and ISA allow starting with smaller amounts
Conclusion
While Premium Bonds have a higher minimum requirement than other savings options, the £25 entry point still makes them accessible to most people. If you can put aside a little each month, meeting the minimum investment needed to win tax-free prizes is within reach for many.
For those who want to get started with just spare change, alternatives like easy access savings provide the flexibility to bank small amounts. But Premium Bonds become an option once you’ve built up £25 in savings – allowing you to enjoy the excitement of the draw alongside a solid base rate of interest.
