A Premium Bond is a lottery bond issued by the United Kingdom government since 1956. At present it is issued by the government's National Savings and Investments agency.
The principle behind Premium Bonds is that rather than the stake being gambled, as in a usual lottery, it is the interest on the bonds that is distributed by a lottery. The bonds are entered in a monthly prize draw and the government promises to buy them back, on request, for their original price.
The government pays interest into the bond fund (3.3% per annum from March 2023) from which a monthly lottery distributes tax-free prizes to bondholders whose numbers are selected randomly. The machine that generates the numbers is called ERNIE, for Electronic Random Number Indicator Equipment. Prizes range from £25 to £1,000,000 and (since October 2022) the odds of a £1 bond winning a prize in a given month are 22,000 to 1.
Investors can buy bonds at any time but they must be held for a whole cal