Guy Mayhew, a 33-year-old local government consultant from Kent, recently won £50,000 in a monthly savings prize draw after opening an account less than a year prior. The winnings were tax-free, a significant benefit for higher-rate taxpayers like Mayhew.
Prize-based savings accounts allow savers to enter monthly draws for cash prizes while holding their money in a savings account. The most well-known example in the UK is Premium Bonds, offered by National Savings & Investments (NS&I). Each bond costs £1, and savers can invest between £25 and £50,000. Premium Bonds offer tax-free cash prizes, with two winners of £1 million each month. However, they do not pay interest, meaning the money's value can decrease due to inflation if prize winnings are not substantial.
Alternatives to Premium Bonds
For those seeking to earn interest or invest beyond the £50,000 limit of Premium Bonds, alternative prize-linked accounts exist, though they are less common. Halifax discontinued its Savers Prize Draw after 14 years, which previously offered monthly prizes of £100, £1,000, or £100,000. Mayhew had previously used this account but sought a new option when it closed.
He discovered the Windfall Bond account from Family Building Society, which he opened in April 2025. This account enters holders into a monthly draw with prizes ranging from £100 to £50,000. Unlike Premium Bonds, the Windfall Bond pays interest at 2.75% annually. Like Premium Bonds, winnings are tax-free.
Each bond costs £10,000 to purchase, with no upper limit on the number of bonds that can be bought. The odds of winning a prize between £100 and £50,000 are one in 100. According to the Family Building Society, the Windfall Bond has paid out over £2.3 million across 2,819 prizes since January 2025. Mayhew initially invested £40,000 in four bonds and has since increased his holding to £120,000 across 12 bonds. He won £1,000 in an October 2025 draw before securing the £50,000 jackpot in February.
Considerations for Prize Savings Accounts
Mayhew learned of his £50,000 win via a phone call from the Family Building Society while on holiday in Tenerife. He noted that the winnings were credited to his bank account before he boarded his flight home. He plans to use some of the winnings for a new car and an upcoming trip to Australia.
The Windfall Bond account may not suit everyone. Its 2.75% interest rate is not the highest available on the market. Interest is paid annually on July 31, which might not suit individuals requiring monthly interest payments. While cash prizes are tax-free, the interest earned is taxable. Furthermore, withdrawing funds requires 35 days' notice, and only full bond withdrawals are permitted, meaning a minimum of £10,000 must be withdrawn. Deposits are protected by the Financial Services Compensation Scheme up to £120,000.
Other prize-linked savings options include the Chip Prize Savings Account, which offers tax-free monthly draws with £100,000 distributed each month, including a £10,000 prize for one customer. Entries are based on the average balance over the calendar month, with each entry costing £10.
Skipton Building Society is set to launch a new prize draw in October, featuring monthly prizes including one £25,000 award, two £10,000 prizes, and five £1,000 prizes. Eligibility for the Members Draw requires individuals over 18 to have at least £100 in savings or an outstanding mortgage of £100, with entry numbers based on membership duration.
Kent Reliance offers a monthly draw where one customer can win £1,000 with a minimum balance of £100. Lloyds Bank has introduced a new monthly prize draw where 50 customers can each win £2,026. To qualify for the Lloyds Bank draw, customers must have their salary paid into a Lloyds, Halifax, or Bank of Scotland current account with a minimum of £1,000 per month, and the offer must be activated in the app or online monthly.