Premium Bonds vs easy-access savings — which is the better UK home for cash?
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In short. Premium Bonds pay no interest — instead you're entered in a monthly prize draw, with a prize-fund rate that's a guide to typical return but isn't guaranteed. An easy-access savings account pays a fixed or variable rate of interest you can rely on.
Both are very safe homes for cash. Premium Bonds are backed 100% by HM Treasury; easy-access savings up to £85,000 per banking licence are covered by FSCS. The right choice depends on whether you value tax-free certainty (savings, if within your Personal Savings Allowance) or the small chance of a much bigger prize.
Last reviewed:
Side by side
Return
Premium Bonds
Variable — based on prize draw (rate is a typical, not guaranteed, return)
Easy-access savings
Variable or fixed interest rate
Tax
Premium Bonds
All winnings tax-free
Easy-access savings
Tax-free up to your Personal Savings Allowance, otherwise taxable
Government protection
Premium Bonds
100% backed by HM Treasury
Easy-access savings
£85,000 per banking licence under FSCS
Maximum holding
Premium Bonds
£50,000 per person
Easy-access savings
No central limit, but FSCS cover caps at £85,000 per licence
Access
Premium Bonds
Withdraw anytime, takes a few working days
Easy-access savings
Withdraw anytime (same day with most accounts)
Best for
Premium Bonds
Tax-free chance of a big prize
Easy-access savings
Predictable, daily-interest growth
When Premium Bonds usually wins
- You've maxed your ISA and Personal Savings Allowance and want tax-free returns
- You like the small chance of a big win
- You want HM Treasury backing for sums above the FSCS limit
When Easy-access savings usually wins
- You want a reliable, predictable return
- Your interest will stay within your Personal Savings Allowance
- You want same-day access without waiting for prize-draw timing
Related quick answers
FAQ
- What is the Premium Bonds prize-fund rate?
- The rate NS&I uses to calculate the size of the monthly prize pot relative to the total amount invested. It is a guide to the typical return — most people with average luck earn close to it, some earn nothing, a tiny minority win much more.
- Are NS&I Premium Bonds covered by FSCS?
- They don't need to be — NS&I is owned by HM Treasury, so 100% of money held with NS&I (including Premium Bonds) is backed by the UK government.
- Can I buy Premium Bonds for a child?
- Yes. Anyone aged 16 or over can buy them for a child under 16. The child's parent or guardian becomes the registered nominee until the child turns 16.