Premium Bonds are an incredibly popular product in the UK, with over £130 billion held and more than 24 million people holding bonds. However, the statistics suggest that winning a prize is a long shot and winning the top prize is supremely unlikely. There are ways to earn a guaranteed rate of return on your savings, but does the draw of the big prizes and a life-changing win make Premium Bonds worth it?
How will the Premium Bond prize fund rate affect you?
The Premium Bond prize fund rate is the average rate at which prizes are paid out over a year. Once the rate drops to 3.6% in August, NS&I will expect to pay out £3.60 in prizes for every £100 invested in Premium Bonds. Of course, even if you have the maximum £50,000 invested, there is no guarantee that you will win anything at all.
The change to the rate for August means that while the chances of any single £1 bond winning a prize remains 22,000 to one, some prizes will reduce in number for the August 2025 draw. You can see in the table below that fewer £100,000, £50,000, £25,000 and £10,000 prizes will be won and the number of smaller winners will drop, but the two £1m prizes will be kept.
| Prize value | Number of prizes won in June 2025 draw | Estimated number of prizes to be won in August 2025 draw |
| £25 | 2,197,831 | 2,569,568 |
| £50 | 1,853,552 | 1,687,680 |
| £100 | 1,853,552 | 1,687,680 |
| £500 | 49,947 | 47,607 |
| £1,000 | 16,649 | 15,869 |
| £5,000 | 1,585 | 1,507 |
| £10,000 | 792 | 754 |
| £25,000 | 317 | 302 |
| £50,000 | 159 | 151 |
| £100,000 | 79 | 75 |
| £1m | 2 | 2 |
Why has the prize fund rate gone down?
The regular cuts to the Premium Bond prize fund over the last year mirror the fall in returns across savings products. The number of accounts offering a high rate of interest has plummeted since the Bank of England began to hold the base rate in September 2023, then cut the rate in August 2024. The most recent decision was to hold the rate at 4.25% last week, but that has not stopped the downward trajectory of savings returns.
Andrew Westhead, NS&I Retail Director, said: "This adjustment to the Premium Bonds prize fund rate – the first in four months – reflects the changing landscape for savings.
"Premium Bonds maintain their unique appeal by offering complete security backed by HM Treasury, the flexibility to withdraw easily, and the excitement of potentially winning a tax-free prize each month. The August draw is expected to deliver more than 6 million tax-free prizes worth over £396 million.
"By making this adjustment now, we’re able to continue to balance the interests of savers, taxpayers and the stability of the broader financial services sector."
Are Premium Bonds still worth it?
The main benefits of Premium Bonds are the potential to win tax-free prizes, the security of a government-backed bond and the chance of winning a truly life-changing sum of money. It is also relatively easy to cash out your bonds or buy more, though new bonds need to be held for one full calendar month before entering the prize draw.
The clear downside is that while Savings interest is guaranteed, Premium Bond prizes are not. The prizes you win could add up to less than the amount you could have earned in interest over the same period. In fact, you might win nothing at all.
It is important to keep in mind that the tax benefits of Premium Bonds are only relevant if you earn over your personal savings allowance. A basic rate taxpayer can earn up to £1,000 in interest in a tax year before they need to pay tax on it and a higher rate taxpayer £500. It drops to £0 for additional rate taxpayers. You can also earn tax-free interest with a cash ISA.
Despite the clear benefits to alternative savings options, no cash ISA or savings account will pay you up to £1m as a tax-free prize. However unlikely it is to win the top prize, it is the key behind the enduring appeal of Premium Bonds. You can learn more about Premium Bonds by reading our article 'How do Premium Bonds work and are they worth it?'.
How to get the best return on your savings
There are ways to earn around 5% interest on your savings. Unfortunately, the majority of these options are 'regular savers', which limit how much you are able to put in each month, or accounts that come with other caveats, such as having a linked current account. Regular savings accounts will suit people who only have a limited amount of money to put away each month rather than a lump sum, and these types of accounts currently pay up to 7.5% interest. You can read more in our article 'How to get more than 5% interest on your savings'.
If you want the tax benefits and flexibility offered by Premium Bonds, but with a guaranteed rate of return, you will want to look for an easy-access cash ISA. We regularly update our 'Best Easy Access Cash ISAs in the UK' page to help you find the best deal. Keep in mind that the top rates often include bonus periods. For example, the current top rate stands at 5.00% and lasts for three months, or you can get 4.92% for 12 months. These rates are not fixed and, like the Premium Bond prize fund rate can be reduced.
If you want more certainty, you should consider a fixed-rate ISA. Check out our regularly updated 'Best Fixed Rate ISAs in the UK' page to find the best deals. Currently, you can get a 4.3% return if you lock your savings away for a year.
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- Offer ends 30th June 2026
Before starting your transfer, check you won't lose any valuable benefits (such as guaranteed annuity rates or a lower protected pension age) and find out what exit fees you might have to pay
