What are NS&I Premium Bonds?

Posted - 03/05/12

NS&I stands for National Savings and Investments: which describes itself as the "Executive Agency of the Chancellor of the Exchequer" of the United Kingdom. The NS&I claim they have investments totaling more than £95 billion, from over 25 million investors/customers.

Of all it's savings products, the NS&I is best known for it's premium bonds. Premium bonds do not offer an interest rate for the money invested: instead the money is exchanged for premium bonds, which are then entered into a monthly prize draw. The top prize is £1 million; there are also other prizes - total value over £1 million - ranging from twenty five pounds to one hundred thousand pounds.

Each premium bond has a unique number, and each premium bond is worth £1. You need to buy a minimum of 100 premium bonds, and the maximum you can purchase is 30,000. The advantage to premium bonds is that the prizes are tax free: which means they are not subjected to either income tax or capital gains tax. The downside is that they do not promise a regular income - ie, interest.