Win Your Interest
What are Premium Bonds?
National Savings and Investments Premium Bonds are basically a type of savings account. Like most other savings accounts, you can pay in and withdraw cash more or less whenever you want or need to (although it can take a little time to process a withdrawal – see below), with interest being paid on the amount you’ve saved. However, Premium Bonds pay out their interest in a very different way, through regular monthly prize draws. That’s right – you actually have to win your interest!
Here’s how it works. Every £1 Premium Bond has an equal chance of winning in any given draw. Naturally, that means the more Bonds you buy the better the chances of one of them being picked as a winner. To keep things interesting, NS&I has a machine it calls “Ernie” (standing for Electronic Random Number Indicator Equipment), which it uses to pick the winning Bonds. You can buy Premium Bonds with a minimum one-off purchase worth £25, or set up a monthly standing order to keep buying more to a maximum total of £50,000 of investment. You have to be over 16 to buy Premium Bonds, but it’s possible for someone else to buy them for people who are younger. In that case, the parent or guardian of the child will hold onto the Bonds until the child turns 16.
Once you’ve held a Premium Bond for at least a full month, you’re eligible to start winning the draws. So, for instance, if you buy yours in the middle of January they’ll be officially entered into the March draw. While we’re talking about timing, if you’re thinking of moving some cash out of your savings and into Premium Bonds then it’s best to consider when your interest is paid out. For instance, if you transfer the money in the final week of the month, you’ll minimise the amount of time it’ll be stuck no longer earning interest but not yet eligible to win a Premium Bond draw.
One exception to the month-long delay is if you reinvest any money your Premium Bonds win back into the scheme. Those winnings will be eligible to win another draw from the next month onward. So, if you won £25 in January and reinvested it, that £25 of Premium bonds would be entered into the February draw.
Premium Bonds stay entered in the monthly draws until you cash them in. Again, you can set the wheel in motion to withdraw your money at any time, but it can take as long as 8 days to actually get your hands on it.