Introduced in 1956 by Harold Macmillan, the premium bond is defined as a government bond that is priced above par. According to National Savings and Investments (NS&I), about 23 million people are premium bondholders.

Issued by the UK government’s National Savings and Investments program, the Premium Bonus is a safe and easy way to save money along with the chance to win tax-free prizes. It guarantees investors that their capital remains 100% safe. Generally, there are two types of premium bonds: non-callable bonds and redeemable bonds.

A holder of premium bonds invests money in the government. Instead of paying interest to bondholders, the government pays money into an award fund and gives the bondholder the opportunity to win tax-free prizes. Premium Bonuses cannot be held in a joint name and are not transferable to another person. One of the main advantages is that all or part of the premium bonuses can be collected at any time you want.

The bondholder is assigned a series of numbers for every £ 1 invested. For example, 100 bond numbers are provided for the purchase of bonds worth £ 100. Therefore, the bondholder has a 100 chance of winning a prize. The random number is generated by a machine called the Electronic Random Number Indicating Equipment (ERNIE). Each month there is a draw and the holder of the voucher can win between £ 50 and £ 1 million. The prize you win in the drawing is free of UK income and capital gains tax.

Premium vouchers can be purchased over the phone or the application form can be obtained from the post office. The application can also be downloaded from the Internet. Premium bonds allow an investor to invest a minimum amount of £ 100; They are sold in multiples of £ 10. The maximum holding limit is up to a total of £ 30,000. Anyone who is 16 years or older can apply for premium bonuses. For children under the age of 16, parents or guardians purchase premium vouchers.