Premium Bonds: minimum investment slashed to £25

The minimum investment for people wanting to buy Premium Bonds has been slashed in a change aimed at encouraging regular saving.

NS&I, which runs the Premium Bonds scheme, says it is one of a number of “enhancements” that it will be bringing in this year. The previous minimum investment was £100.

People aged 16 or older are allowed to buy Premium Bonds, either for themselves or for their children or grandchildren. It’s hoped that the lower minimum investment will encourage more people to use Premium Bonds for regular saving or for making gifts to the younger generation.

Each bond is worth £1 and goes into a monthly draw, and each customer can buy up to £50,000 bonds. Unlike a traditional savings account in which all funds are awarded interest on an equal proportion, the interest paid out on Premium Bonds comes in the form of prizes. These prizes range from £25 to £1m.

The effective “interest rate” at the moment is 1.4%, which means that the total prize pot is worth 1.4% of the total money invested in Premium Bonds.

Bonds can be cashed in at any time, and they are considered to be especially safe because they are backed by the government.

“Investing in Premium Bonds provides the opportunity to win tax-free prizes, whilst ensuring that your money is 100% secure,” said NS&I chief executive Ian Ackerley.

“Lowering the minimum investment on Premium Bonds is part of how we can support a stronger savings culture across the country and help those who want to be able to save little and often, and for those who want to give the gift of savings to their loved ones.”

It is the first time in the 63 years since Premium Bonds were launched that the minimum investment has been cut.