Friday, 9 December 2016

Finance Fridays – Premium Bonds

We were looking at the last ever Autumn Statement for last week's Finance Fridays and what it means for everyone. This week we are talking about Premium Bonds – are they worth investing in again or should you put your money elsewhere. With savings rates so low is it worth buying some. If you're stumped for a present for someone such as your child or grandchild could Premium Bonds be a good idea? Let's have a look at what they are.

What are Premium Bonds? - It is a savings account run by National Savings and Investments (NS and I) which is part of the UK Government. Unlike traditional savings accounts no interest has ever been paid but each bond is put into a monthly prize draw with a chance of winning a cash prize. The money invested in Premium Bonds is used not only to fund the prizes but also to help fund Government spending.

How much do they cost? - The minimum amount you can invest each time is £100 (it did use to be £50). The maximum holding you can have altogether is £50,000. You can buy them for yourself or for your own child, grandchild or great-grandchild. You cannot buy them for any other relatives or friends. Instead you would need to give them the money in order for them to buy some Premium Bonds themselves. For each £1 invested you will be allocated 1 Bond number so a minimum £100 investment would give you 100 separate Bond numbers that would go into the monthly draw.

What are they worth? - Exactly what you paid for them. A Premium Bond bought for £100 20 years ago will still be worth £100 today. However, as the investment is government backed it is guaranteed. To cash in Premium Bonds won't cost you anything and you can do it at any time.

Who is 'Ernie'? - Ernie is the name that was affectionately given to the machine that draws the winning numbers. Obviously over the years the actual machine or now computer software has been updated four times. Ernie was developed by one of the original Bletchley Park code breakers and it stands for Electronic Random Number Indicator Equipment.

What prizes can I win? - Ernie draws the numbers on a monthly basis. Your new Premium Bonds will be put in the draw one full calendar month after you have bought them. Therefore any Premium Bonds bought in December would be in the February draw. The prize fund is determined by the amount of Premium Bonds sold so the more bonds the bigger the prize fund. Any prizes given out are tax-free. The current odds of winning a prize is 30,000 to 1 for each £1 Bond number. Each month two £1 million prizes are drawn along with over 2 million other prizes going down to £25.

How do I know if I've won? - NS and I will write to you and tell you that you have won. They could send you a cheque or you can set up your bank details so any winnings are paid directly into it. Alternatively you can reinvest the winnings into more Premium Bonds. If you have moved house you will need to contact NS and I and tell them your new details. In the meantime you can check the website to see if you have won any prizes. There's also an app you can download as well. NS and I have all the bond numbers from June 1957 that have won but have not been claimed. You could have an unexpected windfall waiting for you!

Do you have any Premium Bonds? Have you ever won any prizes?

If you want to join in with this week's Finance Fridays then add your link to the linky below. Any post concerning financial matters is allowed. Full details here. It doesn't have to be published today as you have until 23.55 on Tuesday 13th December 2016 to join in.
Finance Fridays

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  1. How bizarre as hubby and I were talking about premium bonds only this week. We want to buy more and have just found out we can still do so from France.

  2. I have a couple of premium bonds but never won on them........maybe one day

  3. Loving your new header for the festive season and my Mum and Dad have premium bonds, not something you hear of much nowadays. Mich x

  4. The husbeast has some premium bonds he got as a baby. he has never won anything

  5. I have some premium bonds but don't often win. With interest rates so low it isn't worth putting your money in a bank account really so I might try out my chances and get a few more. x

  6. My kids both have premium bonds and my daughter has won a couple of £25 cheques! We like that there is always that possibility....

  7. At one point a long time ago I had a fair bit in premium bonds but I didn't do very well and cashed them in a year later x

  8. Oh I didn't realise you could even get these any more - I really remember them from when I was a kid!


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