Premium Bonds for Children: How Grandparents Can Buy Them and What They're Worth

Premium Bonds are consistently one of the most popular gifts for a child in the UK - simple to buy, fully backed by the government, and with the appealing lottery-style element of a monthly prize draw. Here’s exactly how buying them for a child works, and how to think about whether they’re actually a good choice.

Who can buy Premium Bonds for a child

NS&I allows a child’s parent, legal guardian, grandparent or great-grandparent to buy Premium Bonds for a child under 16, with the bonds registered in the child’s own name. Other relatives and friends, including godparents, can’t buy them directly - they’d need to give the money to a parent to buy them instead (see our article on how godparents can give tax-efficiently). For grandparents, it’s one of the simplest gifts available: the parents don’t need to have opened any account first, unlike a Junior ISA or Junior SIPP, where only a parent or guardian can open the account itself. You will, though, need to name the parent or guardian who’ll look after the bonds, and have their agreement.

The current terms

• Minimum purchase: £25.
• Maximum holding: £50,000 per child (combined across everyone who’s bought bonds for that child).
• All prizes are entirely tax-free, regardless of the family’s tax position.
• 100% backed by HM Treasury, with no upper limit on security - unlike standard bank deposits, protected only up to £120,000 under the Financial Services Compensation Scheme.

How the prize draw works, recapped

Rather than paying interest, every £1 Bond is entered into a monthly prize draw, with prizes ranging from £25 up to two £1 million jackpots each month. The current prize fund rate is 4.35% (from the September 2026 draw, up from 3.8%), with odds of 21,000 to 1 for each £1 Bond each month. That rate is the average return across all bond holders, not a guaranteed personal return (see our article on Premium Bonds vs a Cash ISA for the fuller mechanics).

Why they’re a particularly appealing gift, specifically for children

• No ongoing management required by the giver - once purchased, there’s nothing further to arrange or maintain.
• The lottery-style appeal genuinely resonates as a gift concept - children (and the adults buying for them) often enjoy the monthly anticipation of checking for a win, in a way that doesn’t apply to an ordinary savings account.
• Complete capital security, appealing to grandparents specifically who want to avoid any investment risk with a gift intended for a child.

The honest downside: the return isn’t guaranteed

The 4.35% prize fund rate is an average, not what any individual child will receive. Every £1 Bond has the same odds, but a small holding gets only a handful of chances each month, so its actual return swings widely - and a child holding a few hundred pounds of bonds can easily go a whole year without winning anything. A cash Junior ISA, by contrast, pays a known interest rate (NS&I’s own Junior ISA pays 3.70% at the time of writing, with some providers paying more), so it’s worth comparing current rates before deciding, particularly for smaller gifts.

Who manages the bonds until the child is old enough

The parent or guardian named on the application manages the bonds - checking for prizes, cashing in if needed - until the child’s 16th birthday, regardless of who bought them. Only that named person can cash the bonds in, so a grandparent who buys them won’t have any control over them afterwards. Once the child turns 16, they manage their own bonds - earlier than the age of 18 at which a Junior ISA passes to the child.

How Premium Bonds fit alongside JISAs and Junior SIPPs

Many families use Premium Bonds as a supplementary gift - a simple way for a grandparent to give money directly to a named child without needing access to an existing account - while the JISA or Junior SIPP (see our Junior ISA vs Junior SIPP comparison) remains the primary, more systematically managed savings vehicle.

The bottom line

Premium Bonds are a simple, completely secure, and genuinely appealing gift for a child, particularly for grandparents wanting an easy way to give without needing an existing account already set up - but because the return on a small holding is so unpredictable, and a cash Junior ISA pays a guaranteed rate, Premium Bonds are better suited as a complementary gift than the sole vehicle for a child’s savings.