Premium Bond Return Calculator

Premium Bond Return Formula:

\[ Return = \frac{E}{Holdings} \times 100\% \] \[ E = Holdings \times Prize\ Fund\ Rate \]

Expected Winnings (E):

Return (Expected Return):

Unit Converter ▲

Unit Converter ▼

From:	To:

1. What is the Premium Bond Return Calculator?

The Premium Bond Return Calculator calculates the expected return percentage for premium bonds based on the amount invested and the annual prize fund rate. It helps investors understand their potential winnings from premium bond investments.

2. How Does the Calculator Work?

The calculator uses the premium bond return formula:

\[ Return = \frac{E}{Holdings} \times 100\% \] \[ E = Holdings \times Prize\ Fund\ Rate \]

Where:

\( Return \) — Expected return percentage
\( E \) — Expected winnings in GBP
\( Holdings \) — Amount invested in GBP
\( Prize\ Fund\ Rate \) — Annual prize fund rate as a decimal

Explanation: The formula calculates the expected annual return by multiplying the holdings by the prize fund rate to get expected winnings, then converts this to a percentage of the original investment.

3. Importance of Premium Bond Return Calculation

Details: Calculating expected returns helps investors compare premium bonds with other investment options, understand the potential profitability, and make informed investment decisions based on current prize fund rates.

4. Using the Calculator

Tips: Enter the amount invested in GBP and the annual prize fund rate as a decimal (e.g., 0.0125 for 1.25%). Both values must be valid (holdings > 0, prize fund rate between 0-1).

5. Frequently Asked Questions (FAQ)

Q1: What are premium bonds?
A: Premium bonds are a savings product where instead of earning interest, holders are entered into monthly prize draws with tax-free winnings.

Q2: How is the prize fund rate determined?
A: The prize fund rate is set by National Savings and Investments (NS&I) and represents the total prize fund as a percentage of total bonds in issue.

Q3: Is the return guaranteed?
A: No, the return is an expected value based on probabilities. Actual winnings may vary as premium bonds are a form of lottery-based savings.

Q4: What is the minimum investment for premium bonds?
A: The minimum investment is typically £25, with additional investments in £1 increments.

Q5: Are premium bond winnings taxable?
A: No, premium bond prizes are tax-free in the UK, which is one of their main advantages over traditional savings accounts.