‹ Explainers

Are Premium Bonds any good?

The short answer

The 4.35% is an average, not a rate. Most holders get less than it.

The prize fund rate is 4.35% from the September 2026 draw, and every prize is free of income and capital gains tax. Odds are 21,000 to 1 per £1 bond, per month.

That 4.35% is what the whole prize pot divided by the whole amount held comes to. A handful of very large prizes pull the average up, so the typical holder — the median — receives noticeably less. Treat the headline as the mean of a very skewed distribution, because that is what it is.

What they are genuinely good for: money above the FSCS limit, since HM Treasury backs the lot, and tax-free returns if you have used your Personal Savings Allowance.

The numbers
  • 4.35% prize fund rate
  • 21,000 to 1 per £1
  • Tax-free, Treasury-backed
Read next
What does FSCS actually protect?£120,000 per person, per authorised firm — and brands can share one licence. Is an ISA actually worth it for me?Often not, if you are a basic-rate taxpayer with under about £22,000 saved.

General information about savings and tax, not advice about your situation. Rules and rates change — this page was checked on 26 Aug 2026.

Reviewed

This page names a provider, so the generic-promotions exemption in article 17 of the Financial Promotion Order is not available to it. It is assessed as outside section 21 on the inducement limb instead — it informs rather than persuades. See REGULATORY_REVIEW.md §3 and §4.1.