Rather than earning interest, people who hold Premium Bonds are given the chance to be selected for cash in the monthly prize draw. After holding their Premium Bonds for a full calendar month, the numbers are entered into the prize draw. Then, the “winners” are chosen at random, using the number generator known as ERNIE (Electronic Random Number Indicator Equipment). The odds of winning per Bond number are 24,500 to one.
While each Bond number costs £1, the minimum amount a person can invest is £25.
There is an upper limit too, with this being £50,000.
There are a number of ways to buy Premium Bonds and this includes buying them online, by phone or by post.
If a person – or a child one is buying them for – already has some Premium Bonds then more can be bought by bank transfer – including standing order.
To buy Premium Bonds in this latter way, the person buying them must be aged 16 or older and either buying them for themself or a child who is under 16.
The purchaser must know their – or the child’s – holder’s number.
Other requirements are that the investment is greater than the minimum limit and in whole pounds, and uses a UK bank account which is in the purchaser’s name.
NS&I states that if a transfer takes a person over the £50,000 limit, then the transfer will be automatically refunded in full to the bank account.
As such, NS&I suggests those interested take a look at their Premium Bonds balance ahead of investing.
Some Premium Bonds holders may opt to reinvest prizes won via Premium Bonds.
However, NS&I states that reinvested prizes are subject to the holding limit of £50,000.
They will reinvest prizes up to the limit and send a warrant for any balance.
If the holding limit is accidentally exceeded by automatic investment or because of purchasing additional Bonds ahead of learning of the reinvestment, NS&I will return the value of the Bonds to the purchaser.
However, this will not include any prizes which may have been won on them, NS&I said.
Ahead of it taking place, the state-owned savings bank has estimated that it could include two jackpots of £1million.