Permissibility of Premium (Prize) Bonds
Question
Please can you tell me if purchasing premium bonds is impermissible? Because gambling means forfeting one thing for another, but in premium bonds we are not gambling anything because we can cash them in for whatever amount we bought them for whenever we want. Please clarify.
Response
You should check how the 'premium bond' gives you the return on investment from where you buy it. Generally, premium bond is a bond issued by the government that government promises to buy at the original price. However, in this particular type of bond, government puts all the interest in a prize fund, from which a lottery distributes prize money to those who have purchased the bonds. As a result, it is also termed as 'prize bond' in some instances.
If this is the type of 'premium bond' that you are planning to buy, then, in my opinion, it clearly violates Islamic injunctions relating to earning the money through interest, and therefore, it would be considered impermissible. In other words, if you won prize money, then all that money is a share of the interest earned on your bond as well as that who have bought bonds from the same source but given to the person whose name came out in the lottery.
The verses relating to earning interest are so strong in fact, that I would recommend that unless you are satisfied that the type of bonds you are investing in is free of interest, you do not buy the bonds. Quran says regarding those who earned interest: