1. What is the Premium Bond Calculator?

The Premium Bond Calculator estimates the expected annual return on premium bonds in the UK. It calculates the theoretical winnings based on the amount held and the annual prize fund rate.

2. How Does the Calculator Work?

The calculator uses the premium bond expected return formula:

Where:

• \( E \) — Expected annual winnings (GBP)
• \( \text{holdings} \) — Amount held in premium bonds (GBP)
• \( \text{prize\_fund\_rate} \) — Annual prize fund rate (decimal)

Explanation: The formula calculates the expected return by multiplying the total amount invested in premium bonds by the annual prize fund rate.

3. Importance of Expected Return Calculation

Details: Calculating expected returns helps investors understand the potential winnings from premium bonds and compare them with other investment options. It provides a realistic expectation of annual earnings.

4. Using the Calculator

Tips: Enter the total amount held in premium bonds in GBP and the annual prize fund rate as a decimal (e.g., 0.015 for 1.5%). Both values must be valid positive numbers.

5. Frequently Asked Questions (FAQ)

Q1: What are premium bonds?
A: Premium bonds are a savings product offered by National Savings and Investments (NS&I) in the UK where instead of earning interest, holders are entered into monthly prize draws.

Q2: Is the expected return guaranteed?
A: No, this is a statistical expectation. Actual winnings may vary as premium bonds are a form of lottery where returns depend on luck.

Q3: What is the typical prize fund rate?
A: The prize fund rate varies but is typically around 1-2% annually. Check NS&I's current rate for accurate calculations.

Q4: Are there any limits on premium bond holdings?
A: Yes, the maximum holding per person is £50,000. Minimum investment is £25.

Q5: How are prizes distributed?
A: Prizes range from £25 to £1 million and are distributed monthly through random draws. Each £1 bond has an equal chance of winning.