Premium Bonds Explained

Learn about premium bonds

The following article is about premium bonds: what are they? how can you invest in them? should you be investing in premium bonds?

What are premium bonds?

Premium bonds are a UK investment product organised by the National Savings and Investment Scheme. The scheme is available to all UK citizens, although can be bought from outside the UK in certain countries. The main feature of Premium bonds is that there is no fixed amount of interest earned from your investment. Instead each £1 of Premium bonds enters you into a prize draw to win tax free prizes. The other main features of Premium bonds are:

• Prizes range between £25 to £1million (two prizes each month are £1million and 5,000 are worth between £500 and £100,000)
• Minimum investment is £100
• Maximum investment per person is £50,000
• All earnings from Premium bonds are tax free
• Prizes are drawn once a month
• There is no guarantee of winning any draw
• The rough odd of winning a prize will be 30,000 to 1 each month (from 1 June 2016) with roughly equates to a return of about 1.25%
• Premium bonds do not expire
• Premium bonds do not lose their capital value such that if you buy £100 of Premium bonds you can sell £100 of Premium bonds at any time in order to receive £100

How to apply for premium bonds?

There are three ways to apply:

• Online - nsandi.com
• Phone - 0500 500 000
• Post - download the form from the nsandi.com website and post to NS&I, Glasgow G58 1SB

Should you be investing in Premium bonds?

I would always recommend having a balanced portfolio of assets. However, bear in mind that there is no guarantee of income from Premium bonds. So my advice is this...if you have spare cash then buying some Premium bonds could be a little bit of fun and may result in some big changes. However, if you are looking to build assets or looking for income then I recommend investing in other products that offer a higher return.

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