Premium Bonds explained

The no-lose lottery has millions of participants who opt fora bit of fun with their savings. Talia Loderick finds out more

- Talia Loderick

Your money is secure and you have the chance of winning £1m. There. That's it. The enduring appeal of Premium Bonds explained in a sentence.

But wait there's more. Premium Bonds first got my attention in 2017. That's when I heard an episode of the Freakonomics podcast, where they were talking about this inspired financial product that incentivised people to save by pairing it with a lottery.

I realised they must've been talking about the humble Premium Bond. Turns out the savings product that I'd always regarded as a bit dull was inspiring people in countries around the world to offer something similar. My interest was piqued.

I'd never paid Premium Bonds much attention. Firstly, because I didn't have any myself. The adults I knew who did have them had typically received them when they were children, as gifts from their grandparents or parents. They talked about their money being "safe" - not about "winning".

Secondly, because you don't earn interest on the money you have saved in Premium Bonds. In a classic savings account, you maximise your lot by earning the highest interest possible.

Earning interest on your savings guards against the effects of inflation, which eats away at the buying power of your money.

But here's what I hadn't appreciated: while you don't earn interest on your money with Premium Bonds, you are entered into a monthly prize draw. Prizes range from £25 to £1m - and winnings are tax-free. And people love winning. There are more than 24 million holders of Premium Bonds.