Editorial note: this guide explains UK tax and savings rules in general terms only. It is not financial, tax or legal advice and is not specific to any prize offered by Fortune Games. Rules and allowances change and depend on your circumstances, so check GOV.UK or speak to a qualified adviser before acting.
Are Premium Bonds gambling?
Not in the usual sense. With Premium Bonds your money is never staked — every pound you put in stays yours and can be withdrawn. What you give up is guaranteed interest: instead, your bonds enter a monthly prize draw for tax-free prizes. So while the prize element is chance-based like a lottery, you cannot lose your stake, which is the defining feature of gambling. The honest description is a government-backed savings product with a lottery-style return.
How Premium Bonds actually work
Premium Bonds are run by NS&I and backed by the Treasury. You can hold between £25 and £50,000, and every £1 bond has its own number entered into the monthly draw once it has been held for a full calendar month. A machine called ERNIE generates random winning numbers, with tax-free prizes from £25 up to two £1 million jackpots each month. There is no interest; the prize fund is the return, spread unevenly across winners, and the prize fund rate and odds are variable, so check NS&I for current figures.
How they compare with the lottery
A lottery ticket is spent the moment you buy it — lose, and the money is gone. Premium Bonds risk only the return: win nothing for a year and you still have every pound, though inflation will have nibbled its real value, which is the genuine cost of holding them. That makes them a cautious home for savings with a flutter attached rather than gambling. Whether they beat an ordinary savings account depends on luck and the prevailing prize fund rate — average luck roughly tracks the advertised rate, but most holders win less than that and a lucky few win far more.
Frequently asked questions
Can you lose money on Premium Bonds?
Not your capital — every pound is yours to withdraw, backed by the Treasury. The risk is earning nothing in prizes while inflation erodes the money’s real value.
Are Premium Bond prizes taxed?
No. All prizes, from £25 to the two monthly £1 million jackpots, are tax-free, which is part of their appeal to savers who have used other allowances.
How is the winner chosen?
NS&I’s random number generator, ERNIE, draws winning bond numbers each month. Every eligible £1 bond has an equal chance in every draw.
Are Premium Bonds better than the lottery?
They are different things. The lottery spends your stake for a shot at huge prizes; Premium Bonds keep your stake and gamble only the interest. As a place to hold money, bonds are the cautious option.
Related guides: Are loot boxes gambling? · Odds of winning the lottery · Is the lottery a waste of money?
18+ only. Gambling should be fun, never a way to make money. Please play responsibly and only with money you can afford to lose. If gambling is affecting you or someone you know, free, confidential support is available 24/7 from the National Gambling Helpline on 0808 8020 133, run by GamCare. You can also visit BeGambleAware (begambleaware.org) or self-exclude from UK-licensed online operators through GAMSTOP (gamstop.co.uk).