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4 Jan 2021

Premium bond winners in January 2021: seven things to do with a windfall

Find out what to do if you're lucky enough to get a jackpot win in 2021

Two lucky winners have begun 2021 with a bang after receiving the £1m premium bonds jackpot prize in NS&I's first prize draw of the year.

The millionaires are from West Scotland and Barnet in north London, while four other winners secured the next-best prize of £100,000.

Here, Which? reveals the winning bond numbers, while looking at a few of the savviest ways of using a windfall. Spoiler: none of them involves going on a massive shopping spree.

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January 2021 premium bond prize winners

This month, the two £1m prize draw winners were from West Scotland and Barnet in north London.

The West Scotland winner is a woman who purchased her winning bond (330VT557685) in May 2018, which is part of an overall holding of £50,000.

A woman from Barnet won the second jackpot prize. She has £20,000 saved in total and her winning bond (135RY390643) was purchased in January 2008.

How many winners were drawn in January?

There were 2,921,327 prizes given out in January's prize draw, worth a total of £83,988,150. Of these, 2,914,446 were worth £100 or less.

The table below shows the full breakdown of prizes.

Value of prizeNumber of prizes

Source: NS&I

Seven things to do with a premium bonds windfall

So you've won some money - be it £1m or £1,000, once you get past the initial elation, there's the small matter of deciding what to actually do with it.

It's a particularly tricky choice at the moment given the fact that savings rates are so low - but there are lots of options that could really benefit your finances for years to come.

1. Re-invest in more premium bonds

If you've been lucky enough to win some money while having less than the maximum £50,000 invested in premium bonds, you could choose to top up your holding. This will theoretically increase your chances of winning again in the future, although it's not guaranteed.

You should weigh up the fact that, since NS&I reduced the number of premium bonds prizes in December 2020, your chances of winning are one in 34,500, and your cash won't earn any interest while you're waiting for a win.

2. Pay off your debts

This may feel like one of the least exciting options, but if you have outstanding balances on any credit cards or loans that you're paying off each month, think how much more money you'd have if they were all gone?

What's more, interest rates on borrowing vastly outweigh the interest you'd make if the money was put into savings.

If your winnings don't cover all of your debts, choose to pay off whichever has the highest interest rate first; if interest rates are similar, try to clear whichever balance is bigger first.

3. Start an emergency savings fund

It's more important than ever to make sure you have an emergency savings fund on hand should you encounter something such as redundancy or an unexpected expense such as a broken boiler or car.

As a rule of thumb, you should aim to put aside enough to cover at least three months' essential outgoings - that includes things such as rent or mortgage payments, bills and groceries.

It's a good idea to keep this money saved in an account that allows instant access, as you never know when you might need it.

4. Save tax-free in an Isa

The tax implications of saving your money only become an issue if you pay higher-rate tax and/or have a large sum of money to save.

This is down to the personal savings allowance; if you're a basic-rate taxpayer, you can make up to £1,000 in savings interest before tax, while higher-rate taxpayers have an allowance of £500. Additional-rate taxpayers don't get a personal savings allowance.

So, if your savings are likely to exceed your allowance, consider an Isa. You can only deposit up to £20,000 in each tax year and there are several types to choose from - you can deposit the full amount in a cash Isa, stocks & shares Isa or innovative finance Isa (IFISA), or split the allowance between a few different types.

If you're aged between 18 to 39, you could also consider a lifetime Isa, which also pays a 25% government bonus on what you save. However, you can only deposit up to £4,000 in each tax year and the money can only be withdrawn without a penalty if you're buying your first home or using it in retirement once you've reached 60 years old.

5. Make an investment - but be aware of the risk

With savings rates looking pretty uninspiring, investments can offer a better return - but you'll need to be careful if you pursue this option as market fluctuations can mean you'll lose money.

For this reason, you should only look to investments if you're willing to keep your money invested for at least five years in order to ride out any market dips.

Depending on how confident you are, you could consider an investment platformor take the DIY approach and build your own portfolio. It may be wise to get financial advice before you make any big decisions.

6. Overpay your mortgage

If you own a property, one of the best ways to use excess cash is to make mortgage overpayments as property tends to increase in value faster than savings options.

What's more, you can cut your overall mortgage term and can potentially save thousands of pounds in interest.

However, the amount you'll be able to overpay might be limited. A lot of mortgages will allow you to overpay around 10% of the outstanding balance per year, so you may not be able to pay off a large amount with one lump sum. Some providers will also charge early repayment fees, so you should keep a lookout for those.

Find out how much you could save with our mortgage overpayment calculator below.

7. Give your pension a boost

One surefire way to help out future you is to use your windfall to boost your pension.

There's a cap on how much you can pay in each year, known as the 'annual allowance'.

In 2020-21, this is £40,000 or 100% of your income if you earn less than £40,000. This allowance includes any contributions made by you, your employer (if you have a company pension) and a third party, which can include pension tax relief.