Understanding what happens to Premium Bonds when you die is essential if you’re responsible for managing someone’s estate. Premium Bonds, offered by National Savings & Investments (NS&I), operate differently from traditional savings accounts. Instead of earning interest, the bondholder enters a monthly prize draw, meaning the value of the estate may fluctuate depending on whether a prize is won.
When the bondholder passes away, their Premium Bonds become part of their estate. Executors and administrators often feel unsure about the correct steps to take, especially if they have never handled Premium Bonds before. This guide explains your options and the process clearly and simply.
What Happens to Premium Bonds When You Die?
Premium Bonds cannot be transferred directly to beneficiaries. Instead, the executor or administrator is responsible for deciding how the Bonds should be managed. You have two main options:
1. Cash the Bonds In Immediately
Executors can choose to cash Premium Bonds in as soon as NS&I is informed of the death. Once redeemed, the Bonds no longer qualify for monthly prize draws. The funds that are released then form part of the estate, ready to be distributed once probate is granted and any debts or liabilities have been settled.
This option is often preferred by estates that want to move quickly, especially if beneficiaries are waiting for funds.
2. Keep the Bonds Entered into Prize Draws (Up to 12 Months)
Executors also have the option to leave Premium Bonds active for up to 12 months. During this time, the Bonds can still win tax-free prizes, potentially increasing the value of the estate. They can be cashed in at any point during this period.
After 12 months, Premium Bonds stop being eligible for prize draws. However, the funds can still be withdrawn indefinitely.
Many executors choose to keep the Bonds active if the estate does not need to be distributed immediately.
Do You Need Probate to Cash In Premium Bonds?
NS&I normally requires a Grant of Probate (or Letters of Administration if there is no Will) if the total value of the deceased’s NS&I holdings exceeds £5,000.
In Scotland, a Confirmation document is required.
This ensures that only the legally appointed personal representative can access the funds.
How to Claim Premium Bonds After Someone Dies
To redeem Premium Bonds, executors must complete a bereavement claim form from NS&I. This typically takes around 15–30 minutes.
You will need:
Bondholder’s full name, address and National Insurance number
Date and place of birth
Date of death
Details of spouse or civil partner
Executor or administrator information
Premium Bond holder number (if available)
Your personal details as the claimant
Once NS&I processes the claim, they issue a warrant (similar to a cheque) covering the balance of the account and any outstanding prize winnings.
Are Premium Bonds Inheritance Tax Free?
Premium Bond prizes are tax-free during the bondholder’s lifetime, but this does not exempt them from inheritance tax. The funds received from cashing in the Bonds form part of the estate. If the total estate value exceeds the inheritance tax threshold of £325,000, the money may be subject to inheritance tax.
Why Executors Should Act Promptly
Although Premium Bonds can remain active for 12 months after death, delaying redemption may slow down the estate administration. Once the estate is ready for distribution, it is best to cash in the Bonds to avoid unnecessary delays.
Handling Premium Bonds is simply one part of the wider estate administration process. Executors must ensure that all assets—including Premium Bonds—are managed correctly and distributed according to the Will or intestacy rules.
