Premium bonds can be cashed in after your passing and added to your estate, or they can be held for up to 12 months and then redeemed. The funds then become part of your estate and are distributed amongst beneficiaries.
If you’re handling the estate of someone who held premium bonds, you may be unsure about what they are or how to cash them in as part of the estate. In our article, we’ll explain everything you need to know and the options available to you.
What Are Premium Bonds and How Do They Work?
Premium bonds are a form of investment held by National Savings & Investments (NS&I) through the UK Government. The government pays interest on the bonds and the interest is then distributed through a lottery.
For each £1 invested, a unique number is attached and entered into a monthly prize draw lottery where winnings start from £25 up to £1 million. These prizes are tax-free and can be paid straight into the individual's bank account or more bonds can be purchased.
As a form of savings, you can withdraw your investments at any time, and because they are backed by HM Treasury and not a traditional bank, this helps secure your assets.
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What Happens to Someone’s Premium Bonds When They Die?
Premium bond accounts cannot transfer to the account of someone else i.e. the executor following the passing of the bondholder. However, there are a couple of options available:
Cash Out Immediately
NS&I allows the executor of the estate to withdraw immediately. When the bond is cashed out, it is no longer eligible for monthly cash prize draws, except for the month it was withdrawn. The funds will then form part of the deceased's estate and can be distributed among the beneficiaries once tax and other liabilities have been paid.
Hold bonds for up to 12 Months
The second option is to keep the bonds in the NS&I account for up to 12 months, though they can be withdrawn at any time during this period. The bonds will be eligible for cash prizes whilst they remain in the account. This potentially increases the size of the estate but may delay the transfer of any inheritance due.
Probate in the UK takes on average between 6 and 12 months, therefore it can be useful to keep the funds in the account until probate is granted. If you believe you will not receive probate before the NS&I 12-month period is up, it is recommended that you use a probate solicitor, who may be able to speed the process up. The account balance at the time of completing the probate application may be subject to inheritance tax (IHT). Any prize winnings during these 12 months may also be subject to IHT.
Do You Need Probate to Cash Premium Bonds In?
Most financial institutions require probate when bonds exceed £5,000. NS&I states that probate may be needed for bonds over this threshold. It's worth checking beforehand.
NS&I may also request probate if the total NS&I savings (including non-premium bond funds) collectively exceeds the £5,000 threshold.
Read more on When Is Probate Required?
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How to Claim Premium Bonds After a Death
To claim the deceased's premium bonds, a bereavement claim form must be submitted. You’ll need the following information when applying:
Information on the deceased (name, address and National Insurance number)
Date and place of birth & death
Information on a spouse or civil partner (if applicable and alive at the time of death)
Executor(s) named in the will (if applicable)
Administrator(s) applying for probate (if applicable)
Premium bonds account number
Personal details of the person claiming
Additionally, you’ll need to submit some probate documents with the claim such as the Grant of Probate or Letters of Administration. If you are in Scotland you’ll need to send in a Confirmation of Executor Dative.
Once NS&I have completed a claim they will send a warrant (similar to a cheque) to the claimant including funds held within the account and any prizes due.
Frequently Asked Questions
Can premium bonds be transferred?
No, they cannot be transferred. They will need to be cashed in and form part of the deceased person's estate.
How do I find out if the deceased had an NS&I premium bonds account
The My Lost Account service will search for any existing accounts. Alternatively, you can speak with NS&I directly.
How long can premium bonds stay active after death?
Bonds can be held in the account for 12 months, after which the funds will be paid out to the person entitled to the money. Repayment of funds can be done at any point during this time.
How do I check for unclaimed prizes?
When you inform NS&I of the bondholder's death, they will pay out any unclaimed prizes owed through a warrant (similar to a cheque). You can check for prizes on their website during the 12 months the account is in the draws.
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Find a Probate Solicitor
Premium bonds need careful attention as they cannot be transferred to any individual after death and the decision to withdraw immediately or in 12 months can impact the size of the estate.
Hiring a probate solicitor can give you peace of mind and help to ensure the process is simplified. Compare My Move can match you with up to 6 licenced probate solicitors. Using our services allows you to compare quotes and services, saving you money and finding the right fit for your needs. Rest assured all companies on our network must pass our strict verification process.
They must also be regulated by either:
Solicitors Regulation Authority (SRA)
Law Society of Scotland (LSS)
Law Society of Northern Ireland (LSNI)
Council for Licensed Conveyancers (CLC)
Institute of Chartered Accountants (ICAEW)
