Premium Bonds
Premium Bonds are a government backed savings product where, instead of earning interest, your money is entered into a monthly prize draw.
What it means
Premium Bonds are a government backed savings product where, instead of earning interest, your money is entered into a monthly prize draw. Every £1 bond has an equal chance of winning tax-free prizes, from £25 up to £1 million. Your original money isn't at risk and you can usually withdraw it whenever you want.
You put £5,000 into Premium Bonds. After a year you might win several £25 prizes, a larger prize, or nothing at all, but you'll still have your original £5,000.
Why it matters
If you're deciding where to keep your savings, it's important to understand that Premium Bonds trade guaranteed interest for the chance of winning prizes.
Premium Bonds are backed by the UK government through NS&I, making them one of the safest places to keep cash.
Are Premium Bonds better than a savings account?
It depends. If you want guaranteed returns, a savings account is usually better. If you like the chance of tax-free prizes and don't mind earning nothing in some months, Premium Bonds may appeal.