Premium Bonds and ISAs are among the most commonly held savings products in the UK, which means most estates include at least one of them. Both come with their own, slightly unusual rules when the holder dies, and getting them wrong can mean missing out on prize eligibility or a valuable tax allowance for a surviving spouse. Here is what executors need to know about each.
Plain-English guide written by Simon Jenkins — covering every stage of the probate process.
Premium Bonds cannot be transferred, only cashed in
Unlike some investments, Premium Bonds cannot be transferred into a beneficiary’s name. They must be cashed in by the executor or administrator and the proceeds paid into the estate, to be distributed in the normal way once the estate is administered. The first step is to notify NS&I of the death, after which the holding is frozen so no further bonds can be purchased on it.
Prize eligibility after death
A little-known rule is that a deceased person’s Premium Bonds remain eligible for the monthly prize draw for up to twelve months after the date of death. After that point, if the bonds have not yet been cashed in, for example because probate is still being obtained, no further prizes can be won, although the funds themselves remain safe with NS&I in the meantime.
When probate is needed to access Premium Bonds
NS&I operates its own threshold for releasing funds without a grant. Where the holding is modest, NS&I will often release the proceeds on production of a death certificate and a completed bereavement form. Where the holding is above NS&I’s threshold, currently set at £5,000, a grant of probate or letters of administration will be required before the funds are released, regardless of the size of the wider estate.
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What happens to an ISA when the holder dies?
An ISA does not need to be cashed in immediately on death. The tax-free wrapper can continue, and any interest, dividends or growth within it remain free of income tax and capital gains tax, for the remainder of the administration period or until the account is closed, whichever happens first. This is sometimes called a continuing ISA. The underlying investments still form part of the estate for inheritance tax purposes and pass to the beneficiaries entitled under the will or the intestacy rules in the usual way.
The additional permitted subscription for a surviving spouse
Where the ISA holder was married or in a civil partnership, the surviving spouse or civil partner can usually claim an additional permitted subscription, an extra ISA allowance broadly equivalent to the value of the deceased’s ISA. This allows the survivor to shelter an equivalent amount of their own money within their own ISA wrapper, on top of their normal annual ISA allowance. It is a separate concept from inheriting the ISA investments themselves, which still pass through the estate as with any other asset. Our wider guide to getting money out of a deceased bank account covers the equivalent process for standard savings and current accounts.
Practical steps for executors
Notify NS&I and the relevant ISA provider as early as possible, request their specific bereavement forms, and ask each provider directly whether a grant will be needed based on their own threshold. Keep a note of the date of death value of each account, as this will be needed both for the inheritance tax return and for calculating any additional permitted subscription available to a surviving spouse.
How Curtis Legal can help
Collecting in savings products like Premium Bonds and ISAs is usually one of the more straightforward parts of estate administration, but the rules around timing and allowances are easy to miss. Read more on our main probate pages about estate administration generally, or get in touch for help with a specific estate.
Frequently Asked Questions
Can Premium Bonds be transferred to a beneficiary after death?
No. Premium Bonds cannot be transferred. The executor or administrator must cash them in and pay the proceeds into the estate for distribution.
Can Premium Bonds still win prizes after the holder has died?
Yes, for up to twelve months after the date of death. After that, no further prizes can be won on the holding, although the money remains safe with NS&I until it is cashed in.
Do you need probate to cash in Premium Bonds?
It depends on the value. NS&I currently requires a grant of probate or letters of administration where the holding is above £5,000, regardless of the size of the rest of the estate.
What happens to an ISA when someone dies?
The ISA can continue as a tax-free wrapper during the administration period, with interest and growth remaining free of tax. The underlying investments still form part of the estate and pass to the beneficiaries.
What is the additional permitted subscription?
It is an extra ISA allowance available to a surviving spouse or civil partner, broadly equal to the value of the deceased’s ISA, allowing them to shelter an equivalent amount in their own ISA on top of their normal annual allowance.
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Written by Simon Jenkins, solicitor and director of Curtis Legal Limited (Simon Jenkins SRA 167489; Curtis Legal Limited SRA 450129).
