Jackpot Dreams Hook a Third of Britons on Premium Bonds

When Raj Gadhvi sees the subject line “You’ve just won!” he dreams, if only for a fleeting moment, that he’s a millionaire.

It’s a dopamine hit that fades when he opens the email to discover he’s won £25 ($33). A far cry from the £1 million jackpot, but enough of a kick to keep Gadhvi and 23 million other British savers — a third of the whole UK population — hooked on playing a government-run prize draw called Premium Bonds .

“It’s a present that’s waiting to be opened every month,” said Gadhvi, 38, who works in fintech in Leicester.

Part-savings account, part-lottery ticket, they’ve become enormously popular. Instead of paying interest, each £1 invested is a chance in a monthly draw and the winnings are tax free. The average return on Premium Bonds is 4.35%, putting them in the realm of a high-yield savings account.

With British finances coming under increasing strain , officials are under more pressure to pull in cash from retail and institutional investors alike. With 30-year borrowing costs at 6%, the UK is asking National Savings and Investments to bring in more money. It’s targeting £15 billion in 2026-27, double the goal from three years ago.

“When it’s very expensive for them to borrow through bonds, that’s when they turn on the tap at NS&I,” said Sarah Coles, head of personal finance at AJ Bell.

However, for savers, there’s no guarantee of earning anything: the odds of winning a monthly prize are 21,000 to 1 per £1 invested, according to NS&I, which runs the draw. The chances of hitting the £1 million jackpot are infinitesimally small.

Family Tradition

Premium Bonds are a family tradition in some households. Children are often gifted accounts from friends and relatives for a shot at becoming a millionaire.

“Why do you invest in Premium Bonds?” said Daniel Marsh, chief executive of Octopus Money. “Because your parents told you to.”

Since 2020, the total amount of cash kept in Premium Bonds has increased by more than 50% to £137 billion, even though customer numbers have only risen by about 8% since then, according to data from NS&I.

That points to wealthier savers stashing away more: AJ Bell’s study showed that the majority of prizes went to accounts holding the £50,000 maximum.

For someone in the top income tax bracket of 45% earning the average win rate on their Premium Bonds, the effective return is close to 8% — a hefty yield for not much risk.

But personal finance experts warn that for younger Britons and those on lower incomes, the math doesn’t add up.

Prizes depend entirely on luck and inflation erodes the value of the account. That’s particularly punishing for people with smaller holdings, who have slim chances winning in the first place.

“For a lot of people, it’s the get rich quick option,” said Coles of AJ Bell. “If life’s milestones seem impossible to reach, the fact that you could get there in one fast loop with a savings account feels like a real hope factor.”