What happens to Premium Bonds when the holder dies?

Oct 23, 2022

If you are administering the estate of someone who has died and who held Premium Bonds, you need to know your options for dealing with them.

Premium Bonds are issued by the government’s National Savings and Investments bank, which is backed by the Treasury. Holders can invest between £25 and £50,000. Instead of a regular interest payment, each £1 holding is entered into a prize draw every month. Winners receive prizes from £25 to £1 million, which are free of tax. The winner can opt to receive the prize by way of payment or automatically reinvest the money into more Premium Bonds, although no more than £50,000 can be held by an individual.

Dealing with Premium Bonds after someone’s death

After a death, the executor or administrator of the deceased’s estate has the job of winding up their affairs and distributing the estate to the beneficiaries named in the Will or, where the deceased did not leave a Will, those entitled to inherit under the Rules of Intestacy.

Assets are generally sold or encashed during the administration period, although some can be transferred to beneficiaries who wish to keep the holding. With Premium Bonds however, there is no option to transfer them.

NS&I does allow them to be held by the estate for one year after death and during this time they will still be entered into the prize draw each month. Any winnings will be sent by warrant, which is similar to a cheque, to the person entitled to claim the money. Prizes cannot be paid electronically during this time, nor can they be consolidated and paid out together at the end of one year.

The executor can check online each month whether prizes have been won by entering the deceased’s Premium Bond holder’s number onto the NS&I website.

Cashing in Premium Bonds after a death

After one year, the Premium Bonds will need to be cashed in. This can be done earlier if the executor or administrator chooses. NS&I will need the details of the deceased, to include their full name and dates of birth and death. They will also require the name of the executor or administrator and a copy of the death certificate.

Is a Grant of Probate needed to cash in Premium Bonds after a death?

For many estates, a Grant of Probate or Grant of Letters of Administration is needed. This is the document that gives legal authority to the executor or administrator to deal with finances after a death. It is not needed in smaller estates, but this will largely depend on the requirements of the banks and other financial institutions where the deceased held their money.

The limit for NS&I holdings is £5,000. This means that if more than £5,000 is held in Premium Bonds or in a combination of NS&I products, a Grant of Probate or Letters of Administration will be necessary.

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