Premium Bonds at 4.35%: are they worth it now?
The prize fund rate rose to 4.35% in September. Why most holders earn less than that, who they suit, and how to check old bonds
NS&I raised the Premium Bonds prize fund rate to 4.35% from the September 2026 draw, up from 3.80%. The headline looks competitive against savings accounts, but the prize fund rate is not what a typical holder receives. This guide explains how the odds really work, who benefits most, and how to track down bonds you have forgotten about.
How Premium Bonds work
Each £1 bond has a separate chance of winning in the monthly draw. Instead of interest, the money goes into a prize fund shared out as prizes from £25 up to £1 million. Your capital is safe and you can cash in at any time, usually within a few working days.
The prize fund rate is the total prize money for the month as a percentage of all bonds held. It tells you what the average pound earns. It does not tell you what you will earn.
Why the average holder gets less
Prizes are not spread evenly. The two £1 million prizes and the other large prizes take a big slice of the fund, but very few people win them. Most winners get £25.
Two consequences follow:
- Most holders earn less than 4.35%. The typical outcome for someone with an average holding is below the headline, because a small number of large prizes pull the average up.
- Small holdings often win nothing at all. With £500 and odds of 21,000 to 1 per bond, you can expect a prize roughly once every three and a half years.
Larger holdings behave more predictably. With the full £50,000, you would expect around 28 or 29 prizes a year, most of them £25, and your return would sit closer to the headline in most years.
Who they suit
Premium Bonds are a good fit for:
- Higher and additional-rate taxpayers who have used up their Personal Savings Allowance (£500 or £0) and their ISA allowance. A tax-free 4.35% prize fund rate is worth about 7.25% before tax to a 40% taxpayer, if they achieved it.
- People holding close to the £50,000 maximum, where returns are steadier.
- Anyone who values total safety and instant access, and would enjoy the chance of a big win.
They suit less well:
- Basic-rate taxpayers with modest savings who are within their £1,000 Personal Savings Allowance. A normal easy-access account paying around 4.5% to 5% will almost always beat Premium Bonds for them.
- Small holdings of a few hundred pounds, where the most likely outcome is no prize in a given year.
Comparing with savings accounts
| Option | Rate | Tax | Certainty |
|---|---|---|---|
| Premium Bonds | 4.35% prize fund rate | Tax-free | Luck-dependent |
| Best easy access | Around 4.5% to 5% AER | Taxable above allowance | Fixed |
| Cash ISA | Check comparison sites | Tax-free | Fixed |
For anyone still within their allowances, a savings account or cash ISA gives a guaranteed return. Premium Bonds win on tax once those allowances are used.
Checking old bonds
Millions of pounds in prizes sit unclaimed, often because the holder moved and NS&I lost touch. There is no time limit on claiming.
- Use the prize checker at nsandi.com with your holder number or NS&I number.
- If you do not know your holder number, use the NS&I tracing service on the same site to find bonds held in your name or bought for you as a child.
- Set prizes to be paid to a bank account or reinvested, rather than by warrant, so future wins are not missed.
Bonds bought for children are held in the child's name and can be managed by the child from age 16.
Watch out for
- The rate can change at any draw. NS&I moved it from 3.80% to 4.35% in a single step, and it can fall as quickly.
- New bonds are not entered into the draw until they have been held for a full calendar month.
- Do not count on winning. Budget as if Premium Bonds pay nothing and treat prizes as a bonus.