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Premium Bond Expected Winnings Formula:
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The Premium Bond Calculator estimates expected annual winnings from premium bonds using Money Saving Expert's methodology. It calculates the statistical expectation based on the current prize fund rate and your investment amount.
The calculator uses the simple expected value formula:
Where:
Explanation: This formula gives the mathematical expectation of winnings based on the current prize fund distribution rate.
Details: Calculating expected winnings helps investors understand the potential return on premium bond investments and compare them with other savings products. It provides a realistic expectation rather than guaranteed returns.
Tips: Enter your total premium bond holdings in GBP and the current annual prize fund rate as a decimal (e.g., 0.0125 for 1.25%). The calculator will show your expected annual winnings.
Q1: What are premium bonds?
A: Premium bonds are a savings product from NS&I where instead of earning interest, you have the chance to win tax-free prizes each month.
Q2: Is the calculated amount guaranteed?
A: No, this is a statistical expectation. Actual winnings may vary as premium bonds are a form of gambling where you could win more, less, or nothing at all.
Q3: How often is the prize fund rate updated?
A: NS&I typically reviews and may adjust the prize fund rate periodically. Check their website or Money Saving Expert for current rates.
Q4: What's the minimum and maximum investment?
A: Minimum investment is £25, maximum is £50,000 per person. Each £1 bond gives you one chance in the monthly prize draw.
Q5: Are premium bond winnings taxable?
A: No, all premium bond prizes are tax-free in the UK, which makes them attractive to higher rate taxpayers.