The government has revealed how funds from Premium Bonds are used after they were quizzed in Parliament this week.

National Savings and Investments, or NS&I, gives away Premium Bonds prizes each month, with the backing of the Treasury and investment from the public who want a chance to win prizes.

Michael Wills, a Labour lord and former justice minister, asked the government to clarify how funds generated by Premium Bonds are used.

He said: “What is their estimate for each of the past three years of their returns from retaining the proceeds of cashed-in Premium Bonds for up to six days before they are transferred to the holder’s bank account?"

Bournemouth Echo: Have you won a cash prize in this month's Premium Bond draw?Have you won a cash prize in this month's Premium Bond draw? (Image: Getty)

In response, Baroness Charlotte Vere, a Tory peer, said that NS&I provides “cost effective finance”.

She added: “It does this through offering savings products to consumers, including Premium Bonds.

"Funds raised by NS&I from these products, including Premium Bonds, flow to the National Loans Fund (NLF). The NLF is the Government’s main borrowing and lending account, and to this end, it undertakes borrowing (primarily by issuing gilts via the Debt Management Office) and uses proceeds and other central Government surplus balances, including funds from NS&I’s Premium Bonds, to manage its cash needs day-to-day."

"The Exchequer’s cash needs are managed on an aggregate basis, meaning funds raised from Premium Bonds are not held in a separate account and do not receive a separate rate of return (which in any case is determined by the market as the government is ultimately a price taker).

"Therefore, there is not a single rate of return on NS&I proceeds and it would not be possible to provide an estimate of returns from retaining the proceeds of Premium Bonds. When a customer divests their holdings of Premium Bonds, these repayments are also funded via the NLF’s activities and are typically processed within three working days.

"However, in exceptional circumstances, such as Bank Holidays, this may take longer. This process allows HM Treasury to manage Exchequer cashflows in a cost-effective manner."

How to check if you have won on Premium Bonds

You can check your account via the NS&I website.

Prize draws are conducted every month and see prizes up to £1,000,000 given away.

To find out if you have ever won a Premium Bonds prize, you will need to dig out your holder's information and head over to the prize checker.

You will need your holder’s number which you can find on your bond record, or in the app.

You can also use your NS&I number which you should be able to find on any communication about your bonds.

Premium Bonds are the UK's biggest savings product, with more than 24 million people saving over £122 billion in them, according to Money Saving Expert.