The US Equivalent of Premium Bonds: A 2025 Guide for US Savers & UK Expats
Ever heard a UK friend talk about “winning” money from their savings account and wondered why that’s not a “thing” in the United States?
You’ve likely stumbled upon one of the UK’s most popular financial products: National Savings and Investments (NS&I) Premium Bonds. It’s a massive, government-backed institution where savings are entered into a monthly prize draw instead of earning traditional interest.
This single topic creates two very different, urgent questions for people in the US:
- For US Savers: What is the closest American alternative to Premium Bonds?
- For UK Expats: I already own Premium Bonds. What are my tax and legal obligations now that I live in the US?
This guide will answer both. We’ll cover the US equivalent of Premium Bonds for those looking for a new way to save, and then pivot to a critical guide for UK expats on managing their existing bonds—a topic with serious tax implications that most guides completely ignore.
What Are NS&I Premium Bonds? (A Quick Primer for US Residents)
Before we find the US alternative, let’s quickly define the UK product.
Premium Bonds are a specific savings product offered by National Savings and Investments (NS&I), which is a financial arm of the UK government. Think of it as being backed by the UK Treasury.
Unlike a standard savings account that pays a predictable Annual Percentage Yield (APY), Premium Bonds pay no interest at all.
Instead, every £1 bond you hold is entered into a monthly prize draw. The prizes range from £25 to two £1 million (around $1.25 million) jackpots.
How They Work: Swapping Interest for Tax-Free Prizes
The entire system is funded by a “prize fund rate.” This is a variable rate (e.g., ~3.55% in late 2025) that determines the total pool of money to be given away as prizes each month. It is not an interest rate you receive.
A government computer, nicknamed “ERNIE” (Electronic Random Number Indicator Equipment), randomly selects winning bond numbers.
The main appeal for UK residents? All prizes are 100% tax-free… in the UK. This is a critical distinction that we will return to.
Can a US Resident or Citizen Buy Premium Bonds?
Let’s get this out of the way immediately.
The short, direct answer is: No.
A new applicant living in the United States cannot open an NS&I account or buy new Premium Bonds.
The expert “Why” is more important. It isn’t just an arbitrary rule. NS&I is a UK-specific body and is not registered or licensed to sell financial products in the United States. To do so would require navigating complex US financial regulations, securities laws, and, most importantly, state-level anti-gaming and lottery laws.
Furthermore, NS&I’s official rules require all applicants to have a UK bank account for all transactions, including prize payouts. For these reasons, the product is off-limits to US residents.
NS&I’s official “Living outside the UK” page]
The US Equivalent: Prize-Linked Savings Accounts (PLSAs)
So, if you can’t buy Premium Bonds, what is the US equivalent of Premium Bonds?
The answer is a growing category of products called Prize-Linked Savings Accounts (PLSAs).
These accounts, sometimes marketed under “Save to Win” or “gamified savings” branding, use the same psychological hook: save money for a chance to win cash prizes.
How “Save to Win” Models Work in the USA
The key difference from the UK model is that US-based PLSAs are not run by the government. They are offered by:
- FDIC-insured banks (protecting your deposits up to $250,000)
- NCUA-insured credit unions (also protecting deposits up to $250,000)
The model is simple: For every set deposit (for example, every $25 you save), you get one entry into a weekly, monthly, or annual prize draw.
The trade-off is in the interest rate. These accounts typically pay a very low “base APY” (think 0.10% or less). The interest that would have been paid to all account holders is instead pooled to fund the prizes. You get to keep your principal, earn a tiny bit of interest, and get a lottery-like “ticket” for saving.
Top US Prize-Linked Savings Accounts in 2025
This is an actionable, high-value section. Here are the most common places to find PLSAs in the US:
- Fintech & App-Based (Nationwide): These are the most direct competitors and are available to most US residents.
- Yotta Savings: A popular mobile-first app. For every $25 you save, you get a recurring “ticket” into a weekly prize draw with tiers up to $1 million.
- PrizePool: Another FDIC-insured fintech. You get one “ticket” for every dollar saved (up to a limit), which are entered into a monthly prize draw with a grand prize.
- Credit Union Networks (State-Specific):
- “Save to Win”: This is a large, established network of credit unions across many states (including Michigan, Illinois, Nebraska, and more). The model is typically an entry for every $25 deposited, with prizes up to $5,000. You must be a member of a participating credit union.
The Best Prize-Linked Savings Accounts of 2025]
Premium Bonds vs. US PLSAs: A Head-to-Head Comparison
This table breaks down the key differences at a glance. This is how you can demonstrate true expertise.
| Feature | NS&I Premium Bonds (UK) | Prize-Linked Savings (US) |
| Backed By | UK Government (100% principal secure) | FDIC (Banks) or NCUA (Credit Unions) up to $250,000 |
| Interest (APY) | None (0%) | Very low base APY (e.g., 0.10% – 0.50%) |
| Prize Source | Variable “Prize Fund Rate” (~3.55% in late 2025) | Interest pooled from all account holders |
| Tax Status | Tax-Free (in UK) | Taxable Income (in US, reported on Form 1099-INT/1099-MISC) |
| Who Can Buy | UK Residents | US Residents |
| Primary Goal | Secure saving with a tax-free prize incentive | Motivate saving with a prize incentive |
The Critical Guide for UK Expats in the USA (What Competitors Miss)
This is the 10x content gap. If you are a UK expatriate living in the US (a “US person” for tax purposes), the previous section was just context. This section is for you.
Managing your existing NS&I Premium Bonds from the US has critical, non-negotiable tax and reporting implications. Ignoring them can lead to severe IRS penalties.
Expert Advice for UK Expats: This section is for you. Managing your existing NS&I Premium Bonds from the US has critical, non-negotiable tax and reporting implications. Ignoring them can lead to severe IRS penalties.
The Big Myth: “Are My Premium Bond Prizes Tax-Free in the US?”
Let’s be blunt: Absolutely not.
The single biggest mistake UK expats make is assuming the “tax-free” wrapper from HMRC (the UK’s tax authority) travels with them. It doesn’t.
The IRS taxes US persons—citizens, Green Card holders, and residents—on their worldwide income. IRS guidance on Worldwide Income].
That £100 prize you won is “income” in the eyes of the IRS. The UK-HMRC rule is completely irrelevant to your US tax return.
How to Report Premium Bond Winnings to the IRS
So, what do you do when you win?
- Categorize It: This is a gray area, as the IRS doesn’t have a specific rule for “Premium Bonds.” It is not technically “interest.” Some accountants argue it’s “gambling income,” while others classify it as a prize or award. The safest and most common approach is to report it as “Other Income” on Schedule 1 (Form 1040).
- Convert It: You must report the income in US dollars. You should use the official exchange rate (from the IRS or a reputable source) for the date the prize was paid into your account (the date you “received” the income).
- Report It: The converted USD amount goes on your tax return. If you receive a significant prize, you absolutely must speak with a cross-border tax professional.
FBAR & FATCA: The $10,000 Reporting Rule You Can’t Ignore
This is the most dangerous and overlooked part of holding NS&I for UK expats in USA.
What is an FBAR?
An FBAR is the “Report of Foreign Bank and Financial Accounts” (FinCEN Form 114). It is not a tax form. It is an information report filed with the Financial Crimes Enforcement Network (FinCEN), a bureau of the US Treasury.
Who Must File?
You must file an FBAR if you are a US person and the aggregate (total) value of all your foreign financial accounts exceeded $10,000 at any point during the calendar year.
The “Premium Bond Trap”
Here is the trap that snares so many expats:
- “My Premium Bond account only has £5,000 ($6,250).”
- “My old UK NatWest current account only has £3,000 ($3,750).”
- “My UK savings account has £1,000 ($1,250).”
Individually, none are over $10,000. But in aggregate, your total is £9,000 ($11,250).
Because your total foreign holdings crossed the $10,000 threshold, you are legally required to file an FBAR and list all three accounts, including your NS&I Premium Bonds. FinCEN’s FBAR requirements].
Failure to file an FBAR can result in staggering penalties, starting at $10,000 for non-willful violations. FATCA (Foreign Account Tax Compliance Act) adds another layer of reporting, often done via Form 8939, for those with much higher balances.
The Verdict: Are PLSAs or Premium Bonds a Good Deal in 2025?
Let’s use our “Experience” E-E-A-T principle to walk through two practical scenarios.
Scenario 1: Susan (The US Saver) with $5,000
Susan lives in Ohio and has $5,000 in cash. She’s choosing between a High-Yield Savings Account (HYSA) and a Prize-Linked Savings Account (PLSA) like Yotta.
- Path 1: High-Yield Savings (HYSA): She puts $5,000 into an HYSA with a 4.20% APY (a common rate in 2025). After one year, she has earned a guaranteed $210 in interest (before taxes).
- Path 2: Prize-Linked (PLSA): She puts $5,000 into Yotta. She earns a base rate of 0.20% APY, for a guaranteed $10. She also gets 200 recurring tickets into the weekly draws. She might win nothing. She might win $100. She might win $1,000.
Expert Verdict: For Susan, the PLSA is a fantastic tool for motivation. If she struggles to build a savings habit, the “gamification” can be a powerful incentive. But for pure growth, a standard High-Yield Savings Account is mathematically superior and provides a guaranteed, predictable return.
Best High-Yield Savings Account Rates 2025]
Scenario 2: David (The UK Expat) with £30,000 in Bonds
David is a UK citizen on a Green Card living in Texas. He has £30,000 (about $37,500) in Premium Bonds from his time in the UK. What should he do?
- Option 1: Keep the Bonds:
- Pros: He’s emotionally attached to them. He still has the “lottery ticket” dream of winning £1 million.
- Cons: He earns a 0% guaranteed return. He must file an FBAR every single year, creating an administrative burden. If he wins any prize (even £25), he has to calculate the currency conversion and report it on his US tax return.
- Option 2: Cash Out the Bonds:
- Pros: He can transfer the $37,500 to the US. His US tax life becomes infinitely simpler. He can put that money into a US-based HYSA and earn a guaranteed ~$1,575 per year (at 4.20% APY). He is no longer subject to the FBAR filing requirement (assuming he closes his other UK accounts).
- Cons: He loses the “fun” and nostalgia of the prize draw.
Expert Verdict: For most expats, the administrative headache, mandatory FBAR filing, and US tax-reporting hassles are not worth the very small chance of winning a prize. Cashing out, simplifying your financial life into US-based accounts, and earning a guaranteed return is almost always the wisest long-term financial move.
FAQs
What is the closest thing to Premium Bonds in America?
The closest thing is a Prize-Linked Savings Account (PLSA). These are offered by some US credit unions (often under the “Save to Win” brand) and fintech apps like Yotta and PrizePool.
Can a US citizen with a UK bank account buy Premium Bonds?
No. NS&I’s rules are based on residency, not just having a UK bank account. If you are a US resident, you are not eligible to purchase new bonds.
Are Premium Bond prizes considered gambling or interest income in the US?
This is a gray area in the US tax code. They are not technically interest. Most tax professionals advise reporting them as “Other Income” on Schedule 1 (Form 1040) to be safe. You must declare all winnings to the IRS.
Is Yotta or PrizePool a safe way to save?
Yes. The deposits in these app-based accounts are held with partner banks that are FDIC-insured. This means your principal (the money you deposit, up to $250,000) is protected, just as it would be at a traditional bank.
5. What happens to my Premium Bonds if I move to the USA?
You can continue to hold your existing bonds. However, you must update NS&I with your new US address. You also gain new, mandatory US tax obligations: you must report any prizes as income to the IRS and, if your total foreign accounts exceed $10,000, you must file an FBAR.
Do I have to declare my NS&I account to the IRS?
Yes, in two ways. You must declare any income (prizes) on your tax return. And you must declare the existence of the account on an FBAR (FinCEN Form 114) if your total foreign accounts top $10,000.
Is it worth keeping Premium Bonds if I live abroad?
For most people, no. The 0% guaranteed return, combined with the significant administrative hassle of US tax and FBAR reporting, makes them a poor financial choice compared to a simple, US-based high-yield savings account.
How do I report my NS&I account for FBAR?
You file FinCEN Form 114 online. You will need to list NS&I as the financial institution, provide the account number, and state the maximum value the account held during the year (converted to USD).
The Verdict: Simplicity Is the Smartest Strategy
Let’s bring this all together.For US residents, the US equivalent of Premium Bonds is a Prize-Linked Savings Account (PLSA). These accounts from apps like Yotta or local credit unions are a fantastic tool to motivate you to save, but they will not grow your money like a standard high-yield savings account will.
For UK expats, your Premium Bonds are a ticking time bomb of financial admin. They are not tax-free in the US and create significant, non-optional reporting duties like the FBAR, which can carry severe penalties if ignored.
A good financial product is one that fits your life. A UK-only product creates complexity for a US-based life. Don’t let the “fun” of a prize draw cause you the very real-world headache of an IRS audit.
