Premium bonds rule changes

New Premium Bond rules

Following the chancellor's budget on 19th March 2014 Premium Bond rules have changed. Previously, savers were limited to investing a maximum of £30,000 in premium bonds. In an effort to encourage greater savings the Chancellor has introduced a number of measures such as the New ISA, as I wrote about in my previous article. Furthermore, the Chancellor has been bold enough to introduce revolutionary rules on pension annuities to be discussed in an upcoming article. Added to these measures to encourage savings are changes to the much loved Premium Bond.

Premium Bond Changes

The intention is that by the end of June 2014 savers will be able to buy up to £40,000 of premium bonds, a 33% increase on the current maximum. Following on from this, by 2015 this maximum will be raised again up to £60,000.  Whilst I don't believe these changes will have a radical effect on savers, I believe it sets a tone for this Government to try to aid savers who have been crippled over the past few years by low interest rates.

Are Premium Bonds a good investment?

Premium Bonds are essentially a lottery. You could win anywhere between £25-£1million, with the higher prizes being less probable. The average return based on probability of winning the various prizes is about 1.8%. This amount is still well above most current savings rates. Coupled wih the fact that any winnings are tax free, makes premium bonds a very attractive savings vehicle.

 Do you like what you've read? Tell your friends by sharing it with one of the buttons below. Please post this to Facebook or Tweet it to help your friends and family. Feel free to send me an email (mrmoneybanks<at>multimillionaireroad<dot>com), find me on twitter@millionairer0ad or comment. Whether good or bad, I want to hear from you all.


Wealth Tortoise said...

I'm pleased the limits for Premium Bonds are going to be raised, as I think they have their place in diversified saver's toolkit. And while they are essentially a lottery like you say, the key thing about PB's compared to say the National Lottery is that you get the chance to win a jackpot while at the same time preserving your pound, i.e. there's no risk to your capital, except for inflation (which apparently is low at the moment). That's something that National Lotteries, Health Lotteries etc don't do. What do they call the Lottery? 'The poor person's tax'...

Lots of old folks swear by Premium Bonds, and they've been around and seen more financial/economic action over the years than us young bucks!

Mr. Moneybanks said...

Hi Wealth Tortoise. My answer has to be in this old post:
Basically I agree - it has its place