Premium Bonds - what's all the fuss about?
In the modern world, there are tons of ways to save and keep your money safe.
Few options open to everyday consumers, however, are as debated and disputed as Premium Bonds.
Here's what you need to know about Premium Bonds.
What are Premium Bonds?
Introduced in the 1950s, Premium Bonds are a lottery bond issued by the UK government that you can buy.
Purchasing a bond is essentially lending money to the government.
What distinguishes these bonds from other bonds the government may issue (such as gilts) is that bonds purchased are entered into a prize draw every month (hence being a lottery bond), giving holders of the bonds a chance to win money.
What is their purpose?
In contrast to other bonds, the government pays no regular interest to the holder of the bond.
If you purchase 100 such bonds, your 100 bonds will be entered into a draw with all other bonds held.
From this, several winners will be picked.
As of 2017, the number of potential winners of each sum of money every month is as follows:
*£1m - two winners
*£100,000 - two winners
*£50,000 - six winners
*£25,000 - nine winners
*£10,000 - 23 winners
*£5,000 - 47 winners
*£1,000 - 1,276 winners
*£500 - 3,828 winners
*£100 - 20,729 winners
*£50 - 20,729 winners
*£25 - 2,172,842 winners
It's important to check monthly whether or not you have won anything from the pot. You can do this online using the Premium Bond Prize Checker; but don't worry, if you do win big or small, the NSI will let you know.
How to buy and cash in Premium Bonds
You can purchase them on the official National Savings and Investments website.
Anyone over the age of 16 can purchase Premium Bonds anywhere between £100 worth £50,000 worth.
The more you have, the more chance you have of winning.
Parents, legal guardians and grandparents can also purchase them for those under 16, as a gift.
Remember, you can cash in premium bonds any time through the same NSI website link above.
Are Premium Bonds worth it?
People are often divided on Premium Bonds. There is no simple answer.
For many, saving your cash with no guaranteed return on interest rates is a mugs game. Chances are, you will make no winnings from them.
For others, they are a fun way to save, offering the chance of a win.
With the ability to purchase for children, they are often seen as a fun way to allow savings to be held in their name.
Are Premium Bonds better than saving in a bank?
At a time when interest rates are so low (and who knows when they will be going back up), Premium Bonds may also seem like a preferable way to save.
The return on savings for many accounts is pitifully low already – you may as well put your cash in Premium Bonds and hope to hit the jackpot, some say.
The government, in fact, recently announced it would be cutting Premium Bond winning numbers.
This has been done with the explicit intention to bring the total prize money in line with interest rates.
Interest rates have been held at a historically low rate for many years now, but were pushed down even lower in 2016 by the Bank of England in response to the potential economic fallout of the UK voting to leave the European Union.
The odds of winning, though, will remain the same, at 30,000 to one - but winners are now much less likely to win big.
For more advice on looking after your money, be sure to check out the rest of our money guides.
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