Buying Premium Bonds to make Money
Premium bonds have been around since just after the war, they were initially created as a way to encourage people to save money as well as help the government make more money.
Premium bonds work in a similar way to the National Lottery, each bond is worth a £1 and every month all the bonds are entered into a prize draw and have an equal chance to win anything between £50 and £1 million, but the big difference between Premium Bonds and the National Lottery is that you keep you initial investment you never loose it.
Premium Bonds at a glance.
• The maximum amount you can invest in Premium bonds is £30’000 and the minimum is £100.
• Your bonds are secure they are run by NS&I (National Savings and Investments) which is backed by the Government so there is never any chance you would love your investment.
• Winnings can reinvested to buy more bonds or you can take a cheque.
• ERNIE (electronic random number indicator equipment) chooses the winning bonds each month randomly.
• Premium Bond winnings are Tax Free so anything you win will not be Taxed.
• Around 1.48 million prized are awarded each month, this is made up of 1.2 million £50 prizes, 240’000 £100 prizes and the other 17’000 are between £500 and £1 million (there are 2 £1 million prizes each month except on some special anniversary draws where there are more)
But are Premium Bonds worth it?
The chance of winning a million pounds with one Premium Bond is 17.5 billion to 1 compare this to the National Lottery and the chances of winning the jackpot with a £1 lottery ticket are 14 million to 1, considerably lower!
But unlike the lottery where if you loose you loose your stake, if you don’t win anything with premium bonds you don’t loose your bonds, you will always have them.
In my opinion I don’t think Premium Bonds are worth investing very much money in, I had £1500 of premium bonds for 2 years and didn’t win once! If you consider the current interest rate is on an ISA is 6% over the course o 2 years if the interest rate stayed the same I would have made around £180 (it would be slightly more than this as the interest would have been compounded). This means I would have needed to win at least 4 x £50 prizes to get the same return as the best performing ISA.
Since I didn’t win anything over the 2 years if you consider inflation currently to be around 3% my £1500 would be worth 6% less since I hadn’t won anything after 2 years.
So in my opinion if you have a little bit of spare money that you would like to put aside and like a flutter where you don’t loose your stake then Premium Bonds are the thing to invest. You never know you might be one of the lucky ones and win a large prize.
Claiming old Premium Bond prizes.
As long as you have a record of your Premium Bonds numbers you can easily check if you have won anything by visiting the Premium Bond website, unlike the lottery there is no time limit to claim a winning prize. Currently there are £28 million worth of Premium Bonds prizes that have been unclaimed.
It is worth noting that Premium Bonds cannot be passed on to another person so if a relative of yours dies that has premium bonds and they have won you only have 12 months to make a claim on them.
A bit of fun
A video of the first premium bonds draw in 1956
ERNIE explained in 1956
