Premium Bonds

Premium Bonds is a lottery bond scheme organised by the United Kingdom government since 1956. At present it is managed by the government's National Savings and Investments agency.

The principle behind Premium Bonds is that rather than the stake being gambled, as in a usual lottery, it is the interest on the bonds that is distributed by a lottery. The bonds are entered in a monthly prize draw and the government promises to buy them back, on request, for their original price.

The government pays interest into the bond fund (4.15% per annum in December 2024 but decreasing to 4% in January 2025) from which a monthly lottery distributes tax-free prizes to bondholders whose numbers are selected randomly. The machine that generates the numbers is called ERNIE, an acronym for "Electronic Random Number Indicator Equipment". Prizes range from £25 to £1,000,000 and (since December 2024) the odds of a £1 bond winning a prize in a given month are 22,000 to 1.

Investors can buy bonds at any time but they must be held for a whole calendar month before they qualify for a prize. As an example, a bond purchased mid-May must then be held throughout June before being eligible for the draw in July (and onwards). Bonds purchased by reinvestment of prizes are immediately eligible for the following month's draw.

Numbers are entered in the draw each month, with an equal chance of winning, until the bond is cashed. As of 2015, each person may own bonds up to £50,000. Since 1 February 2019, the minimum purchase amount for Premium Bonds has been £25. As of January 2025^[update] there are over 128.7 billion eligible Premium Bonds, each having a value of £1.

When introduced to the wider public in 1957, the only other similar game available in the UK was the football pools, with the National Lottery not coming into existence until 1994. Although many avenues of lotteries and other forms of gambling are now available to British adults, Premium Bonds are held by more than 24 million people, equivalent to more than 1 in 3 of the UK population.

The term "premium bond" has been used in the English language since at least the late 18th century, to mean a bond that earns no interest but is eligible for entry into a lottery.

The modern iteration of Premium Bonds were introduced by Harold Macmillan, as Chancellor of the Exchequer, in his Budget of 17 April 1956, to control inflation and encourage people to save. On 1 November 1956, in front of the Royal Exchange in the City of London, the Lord Mayor of London, Alderman Sir Cuthbert Ackroyd, bought the first bond from the Postmaster General, Dr Charles Hill, for £1. Councillor William Crook, the mayor of Lytham St Anne's, bought the second. The Premium Bonds office was in St Annes-on-Sea, Lancashire, until it moved to Blackpool in 1978. On 2 June 1957, Ernest Marples (Postmaster General) started the first Premium Bond draw.