The lottery you can't lose cash on with tax-free prizes & £1m jackpot – how to increase your chances of winning

The Sun

a day ago

WHILE it might sound too good to be true, there is a lottery with tax-free prizes, and a £1million jackpot EVERY month, plus you won't lose any cash when you play.
And with more than 6 MILLION prizes up for grabs in the UK competition this month alone, here The Sun's money team explains how you can play, and the pros and cons of playing.
The Premium Bonds are the nation's favourite savings account in the UK, with 23million people holding £127.7billion in them as of the end of 2024.
These accounts are run by the government-backed National Savings and Investments (NS&I) bank, and are a bit like a lottery for your savings.
Instead of traditional savings accounts, where you earn interest on your money, savers buy bonds, which are then entered into a prize draw every month.
There are two £1million jackpots available up for grabs every month, but you can also bag prizes of £100,000, £10,000, all the way down to £25.
This month, there were a whopping 6,005,404 prizes handed out in total.
Savers love them because they're the safest way to store your cash with government-backed account, meaning the chances of it going bust and you losing your money are virtually non-existent.
It means ALL your money is protected. In comparison, if you put your money into a regulated firm like a bank, building society or investment firm, your money is protected up to £85,000.
Another bonus is that any prize you win is tax-free, so you don't have to pay a slice of your winnings to the taxman.
But are there ways to boost your chances of winning the seven-figure prize? Here's everything you need to know …
How do they work?
You can save up to £50,000 in Premium Bonds.
Each bond is worth £1 and every bond is entered into a monthly prize draw.
This means you could win several prizes in one month if you hold multiple bonds.
You must have held each bond for at least one month for it to be entered into the prize draw.
When Premium Bonds are entered into the prize draw, bond numbers are randomly selected by a system called the Electronic Random Number Indicator Equipment, also known as 'Ernie'.
Sarah Pennells from pensions and insurance company Royal London said: 'Ernie uses an audited, random number generator to 'pick' the winners.
'Because it is random, it means that each £1 bond has an equal chance of winning.
'Your odds depend on how many bonds you hold, as the more you have, the more likely you are to win - though remember this is still not guaranteed.'
What are the odds of winning?
According to NS&I, every bond entered into the prize draw has odds of winning of 22,000 to 1.
As every entry is worth £1, you would theoretically need £22,000 worth of bonds to be 'guaranteed' a win once a month.
But in reality, the odds don't work this way - and luck is also a big factor.
In fact, some people have won the huge £1million jackpot with just a small amount of cash saved.
In 2004, someone from Newham, London, won £1million with just £17 in Premium Bonds, having held those bonds since 1959.
And one winner from Staffordshire who invested just £1 in 1960 won £25,000 in September last year.
Be warned that NS&I changes its prize rate regularly, so the odds can change at any time.
This 'prize fund rate' is an estimate of how much you should win based on the amount you have saved, and this is currently 3.6%.
You can check your odds using an online calculator, such as on premiumbondsprizes.com.
You might have a better chance of winning a small prize on another lottery game.
For example, Thunderball has odds of one in 29 for winning its lowest £3 prize, while RSPB's lottery has odds of one in 240.
However, the lowest premium bond prizes are higher than the lowest on offer from most lottery games, and the chances of picking up a top prize on most lottery games are very slim.
For example, the odds of winning the jackpot on the Euromillions are one in 140million, while you've got a one in 145million chance of bagging the jackpot in the Lotto draw.
It is also free to enter the premium bonds draw as you don't lose any money for entering, while most lottery games cost to enter.
'I once won £500 - I love Premium Bonds'
ADHD coach and comedian Suzi Payton, from Brighton, loves the excitement of checking to see whether she has won a prize on her Premium Bonds every month.
The 50-year-old, who struggles with ADHD and managing her money, said she finds the prize draw system has helped her to save compared with a regular savings account, and she has now managed to squirrel away thousands of pounds.
'I love the dopamine hit when I get an email from NS&I saying I've won,' she said.
'I'm an eternal optimist and always wonder whether it will be millions or even thousands. The most I have won in one go was £500, and I've also won plenty of £100 prizes and £25 prizes.
'As a person with ADHD, I find managing my finances difficult, but Premium Bonds are a fun way of saving.'
Can you boost your chances of winning?
Technically, the only way of boosting your chances of winning a Premium Bonds prize is to buy more bonds.
But we've taken a deeper dive into the stats to see if there are any hidden winning Premium Bonds trends you should be aware of.
We looked at the winning £1million jackpot bond codes that were drawn over the past six months (since March).
Each bond has a unique code of 10 or 11 characters, made up of a selection of numbers and two letters.
The codes do not include the letters I, O and U because NS&I says the letters I and O look like the numbers one and zero. It says U can look like a misprint.
The most common number which appeared across all 12 winning bond codes was "0", which featured 22 times, followed by 2, which featured 17 times, then 1, featuring 13 times.
While the most common letter was "Z" and "D", which both feature 3 times.
You also don't need to have waited that long to win a prize. Since Premium Bonds £1million prize were launched in 1994, more than 10 bond holders have won the jackpot after having Premium Bonds for just two months, according to NS&I.
Meanwhile, the luckiest region in the UK for winning the jackpot last year was the South East, with seven people in the region winning £1million from across the counties of West Sussex, Hampshire, Surrey, Kent and the Isle of Wight.
What are the pros and cons?
One of the biggest advantages of Premium Bonds is that you have the potential to win a jackpot of £1million, which is a life-changing amount of money for most people.
Another major advantage is that the accounts are tax-free, which could be useful for people who either win a significant sum on Premium Bonds, or for those who are likely to use up their personal savings allowance.
The personal savings allowance - the amount you can earn on your savings tax-free - is £1,000 for basic rate taxpayers, reducing to £500 for higher rate taxpayers and £0 for additional rate payers.
'You can also access the money fairly quickly at any time,' Ms Pennells said.
However, there are some downsides to holding Premium Bonds that are worth considering.
For one, there is the chance that you never win anything at all, or you only win small prizes, so your money might have worked harder in a savings account.
NS&I data from April shows that around 14.4million holders - equivalent to around two thirds - have never won a prize.
Ms Pennells said: 'The prize fund rate is now below many interest rates offered by traditional savings accounts, where your money is guaranteed to earn interest, compared to having it sit somewhere where you have just a slim chance of winning the top prize'.
Are you better off saving elsewhere?
Laura Suter, director of personal finance at AJ Bell, looks at whether it's a regular savings account is a better place to stash your cash.
"Premium bond rates are now significantly below the top rates in the market, meaning savers are paying a hefty premium for the safety and brand name of NS&I.
"The top easy-access account on the market pays 5% interest, meaning that someone with £20,000 of savings will be sacrificing £280 of interest a year by opting for Premium Bonds.
"But that also assumes they get the average return on the account – which many don't.
"Considering many Premium Bond holders will never win a prize and the average expected return is lower than the top easy-access account, savers could well be better off with a guaranteed return elsewhere.
"Premium Bonds' big selling point is that any money you win in prizes is tax free, which makes them more attractive for higher earners.
"Plus, if the savings rates on standard savings accounts don't excite you, then you can gamble on winning one of the top Premium Bond prizes - after all, someone has to win it.
"Another big appeal of Premium Bonds is that they are run by the government, so they are seen as the safest-of-safe place to keep your money.
"So, there are a few groups where Premium Bonds are a very attractive option, but for most, the safety of a regular interest rate will be better, and savers may want to shop around for the best rates on offer."
However, if you're feeling more adventurous, why not consider investing in the stock market?
This is best for people who have a savings goal that is more than five years away, such as those saving for a house, or for retirement.
Experts advise locking your cash away in investments for at least five years so you can mitigate any dips in the market, and allow your money to recover.
A stocks and shares ISA is a great place to start - you can open on through a high street bank, or investment platforms like AJ Bell or Hargreaves Lansdown.
You can invest up to £20,000 each tax year in these accounts and any gains you make are tax-free. Look at reviews and understand what charges you'll need to pay before selecting your a platform.
Don't forget your pension, which is probably the most tax-efficient way to save your cash.
You can save up to £60,000 a year into a pension or 100 per cent of your annual earnings, whichever is lower, and most importantly, you can get tax relief on your contributions.