Premium Bonds as a Baby Gift: How NS&I Premium Bonds for a Child Under 16 Work (UK)

Relatives often ask what would make a lasting gift for a new baby that is not another outfit. One option is Premium Bonds, a National Savings and Investments (NS&I) product that can be bought for a child under 16. This guide summarises what NS&I publishes about how they work for children, including who manages them and how gifts from family and friends are handled. It is general information, not financial advice: the product is a prize draw rather than an interest-paying account, and NS&I’s terms, rates and odds can change. For a savings option that works differently, see our guide to Junior ISAs for a new baby.

How Premium Bonds work

NS&I says Premium Bonds are entered into a monthly prize draw, with prizes ranging from £25 to £1 million, and that prizes are free from UK Income Tax and Capital Gains Tax. The bonds do not earn interest. Instead, an annual prize fund rate funds the monthly draw, and NS&I says that rate, the prize values, the odds of winning and the way prizes are allocated are all variable and can change at any time. It states that every £1 Bond entered has the same odds, that more bonds mean more chances, and that inflation can reduce the true value of money over time. NS&I describes Premium Bonds as not suited to someone who wants a regular income from savings or guaranteed returns (NS&I, “Premium Bonds”).

Buying for a child

NS&I says Premium Bonds can be bought as a gift for a child under 16. The key rules on its Premium Bonds page are:

• Who manages them: children under 16 can hold Premium Bonds, but a parent or guardian looks after them until the child’s 16th birthday, regardless of who bought them. The bonds and any prizes belong to the child, and the child begins to manage their own bonds at 16.
• Amounts: each investment must be at least £25, and a child must not hold more than £50,000 of Premium Bonds in total.
• More than one guardian: the same child can have more than one nominated parent or guardian, each with a separate holder’s number.
• How to buy: parents or legal guardians can apply online, by phone or by post. If a child already holds bonds, more can be bought by bank transfer or standing order.
• Documents and prizes: NS&I sends confirmations, prize information and payment for cashed-in bonds to the nominated parent or guardian until the child is 16.

Giving them as a gift from family or friends

A relative or friend can buy bonds for someone else’s child. NS&I says this can be done online or by post, but not by phone, and that the buyer can ask for an electronic or paper gift card to pass on to the child. It is specific about the limits of the arrangement. The gift-giver cannot look after the investment on the child’s behalf, and the bonds cannot be repaid to the buyer, since only the nominated parent or guardian can manage and cash in the bonds. NS&I asks buyers to make sure the parent or guardian is happy to look after the investment and agrees to their details being given, and says it will check the identity and address of everyone named on an application and may ask for documents. The application needs the buyer’s, the child’s and the parent’s or guardian’s addresses and dates of birth.

The practical lesson is to speak to the child’s parents before buying, because the parents will be the ones managing the bonds and receiving NS&I’s paperwork.

Prizes, checking and cashing in

Prizes can be paid to a bank account, reinvested into more bonds or sent by cheque, and NS&I says a prize-checker app, an online checker and an Amazon Alexa skill are available. Bonds can be cashed in in whole or in part at any time. For a child’s bonds, the parent or guardian needs the child’s holder’s number and their own bank details. NS&I says larger prizes of £25,000 or more need a claim form before payment.

Weighing it up as a gift

NS&I’s own summary lists what suits Premium Bonds: a chance to win tax-free prizes, easy access to money and a savings gift for a child under 16. It also lists what does not: a regular income, guaranteed returns or saving jointly with someone else. A child’s total is capped at £50,000, and the person who buys the gift does not control it afterwards. For families, that means it works best as a modest gift agreed with the parents, alongside other steps such as claiming Child Benefit. For other gift ideas that involve no paperwork, see our guide to baby gift sets.

Questions readers often ask

Can a grandparent buy Premium Bonds for a grandchild by phone?

NS&I says bonds bought for someone else’s child cannot be bought by phone. Parents and legal guardians can apply online, by phone or by post.

Does the child get the prizes?

NS&I says any bonds bought and any prizes paid for a child belong to the child, with the parent or guardian responsible for managing them until 16.

Is the prize rate fixed?

No. NS&I says the annual prize fund rate is variable and can be changed up or down from time to time.

The bottom line

Premium Bonds can be bought for a baby by a parent, or given by a relative or friend, in amounts from £25 up to a £50,000 total per child. A parent or guardian manages them until the child turns 16, gift-givers cannot manage or reclaim them, and the product pays tax-free prizes through a draw rather than interest, with variable odds and no guaranteed return. Speaking to the parents first is the practical step.

Sources

• NS&I, “Premium Bonds”