[tialaramex]

The rationale for Premium Bonds isn't really the tax it's the fact that people like gambling.

It turned out that persuading Aunt Sally to buy the new baby £100 of investment that will earn interest and might be worth something when the baby goes to college is hard - whereas Aunt Sally is much more interested in buying the baby £100 of scratch-offs with a tiny chance it wins big but most likely it gets nothing. This is before scatch-offs were legal in the UK as they are now but NS&I tweaked the numbers to offer a product that is (from their point of view as a bank with many savers) just a bond, but from the individual saver's point of view works like a lottery.

https://www.nsandi.com/products/premium-bonds

[Closi]

It’s often the tax, my parents have premium bonds and cite the tax benefits as they have maxed their ISA.