Premium Bonds are a savings account with your interest dictated by a monthly prize draw. The prize fund rate is just a vague watermark showing that the total payout is 1.4% of all the cash in them.

Yet it doesn’t mean put £100 in bonds and you’re likely to win £1.40. That’s impossible, as the smallest prize is £25. As our Premium Bond Probability Calculator shows, 19 of every 20 people with £100 in will win nothing – for the other person to get £25.

Even if you line up everyone with £1,000 in Premium Bonds in order of their year’s winnings, the halfway person would have won… nowt, nada, not a penny! You’d be about two-thirds of the way along before you hit the first winner.

This ‘halfway along’ measure (the median average if you remember school maths) is a far better indication of what someone with typical luck would win than the prize rate.

Let me prove that with an extreme example… *Imagine I sold a million people a £1 lottery ticket, and then paid just one winner £1,000,000. As the ‘average’ payout is £1, I could argue everyone gets their money back. This, of course, is gibberish. Instead, line them up in order of winnings and the halfway person would’ve won nothing – a far better representation.*

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*Premium Bonds are similar – for everyone who wins £1 million, many must win nothing. So the prize fund rate inflates people’s realistic winnings.

But the closer you are to saving the £50,000 maximum, the more things smooth out. So with typical luck, while you’ll still win less than 1.4%, it’s not that much less.