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Premium Bonds

Premium Bonds are a popular investment in the UK, and are offered through National Savings and Investments.

Rather than having an interest rate or coupon rate, each premium bond is effectively a lottery ticket. Each month a random selection of premium bond numbers are selected, and the owners receive a payment which can vary from a few pounds, to a million pounds.

If you just own a single premium bond, your chances of winning are small, but as of May 2020 you are allowed to hold £50,000 worth, which increases your odds.

You are entered into the lottery automatically each month. The payments received are tax free.

Premium Bonds are very popular. Since there is an element of chance, it is less desirable than a fixed interest rate or coupon for people who want a guaranteed return. However, for a UK citizen, it's worth considering for any excess capital which can't go into an ISA or other tax free investment.