PICK A WINNER – BEST PLANS FOR TAX-FREE PRIZES

Savings accounts won’t earn you a fortune – so try for a tax-free prize

THE Bank of England increased its base rate in November last year, but many savers have seen little difference in the interest paid on their hard-earned cash.

So those fed up with traditional savings accounts may be looking for other ways to make some money without worrying about the tax implications.

There are several options which involve the possibility of a bumper windfall. These range from Premium Bonds, offered by National Savings & Investments, to monthly prize draws run by certain banks and building societies.

But, as with buying National Lottery tickets, you have to weigh up t he odds of you actually winning anything.

PREMIUM BONDS

INSTEAD of earning interest on your money in a standard savings account you can buy Premium Bonds which are entered into a monthly draw – and stand a chance of winning one of two £1 million tax-free jackpots each month, as well as prizes ranging from £25 to £100,000.

Around 21 million people have £72 billion of savings tied up in these bonds which are offered by Government- backed National Savings & Investments. For a chance of winning, you need to have between £100 and £50,000 invested. The odds of winning a prize are 24,500 to one.

Anna Bowes of website Saving Champion says: ‘ The bonds pay prizes equivalent to an annual rate of 1.4 per cent. When you compare this to a standard easy-access account – the top rate being around 1.35 per cent – it does not look too bad. The big issue is that this rate is not guaranteed. It is a mere statistic and you could win more – or nothing at all.’

As with the National Lottery, the more you invest, the greater your chance of winning, because each bond is entered separately.

Last month, the £1 million prize was won by a man from Bedfordshire who had bought bonds for the first time in January.

The £7,000 worth of bonds that he bought became eligible for the March draw – and he scooped the jackpot.

Overall, more than 3 million prizes were paid out in March’s draw.

HALIFAX SAVERS PRIZE DRAW

SAVINGS giant Halifax, part of banking group Lloyds, runs a monthly prize draw for customers who have at least £5,000 deposited in one of its savings accounts.

Those who register for the draw are in with a chance of winning prizes which usually include three top prizes of £100,000, a hundred wins of £1,000 and 1,500 prizes of £100.

In some months there is also a ‘ super- draw’ with the chance of winning up to £500,000. The next one is in May.

Halifax says it is unable to calculate the odds of winning because of the way the entry criteria works. The number of entrants changes every month, altering the odds.

Since the draw began in 2011, there have been more than 80,000 winners and the bank has paid out more than £48 million. Bowes says: ‘While savers with the Halifax who hold an account with £5,000 have the chance to win one of the prizes – and to earn interest at the same time – the slight sting in the tail is that the interest rates are uncompetitive.’

Whether you participate depends

on whether you are prepared to sacrifice the interest on a more competitive savings account elsewhere, in return for the outside chance of a win.

Sarah Coles of financial adviser Hargreaves Lansdown says: ‘If you saved £5,000 in the Halifax twoyear fixed-rate savings bond paying annual interest of 0.55 per cent, you would earn £55 in interest over two years. But the same amount saved in the highest-paying equivalent savings bond would pay interest of just over £200.

‘So you would need to win two minimum prizes of £ 100 during the two years to be better off with Halifax. Given t hat you would only be entered in 24 draws, the most likely outcome is that you would win nothing.’

FAMILY BUILDING SOCIETY WINDFALL BOND

FAMILY Building Society runs the Windfall Bond which provides the chance to win monthly tax- free prizes. Savers must invest £10,000 which buys one bond.

You then get the chance to win one of 13 prizes up for grabs each month – one of £ 50,000, two of £10,000 and 10 of £1,000.

With just one bond, the chance of winning over the course of a year is one in 64.

Once again, the more bonds you hold the greater the chance of winning a prize.

Bowes says: ‘In addition to being entered into the monthly prize draw, those with money in the Windfall Bond get interest equivalent to the Bank of England base rate – which is currently 0.5 per cent. But each bond must have a deposit of exactly £10,000 and if you need early access to the money you have to close it.

‘ You can only do this without incurring a charge after a notice period of 35 days. This product is not as flexible or accessible as it seems.’

THE NATIONAL LOTTERY

WITH t he cost of a National Lottery ticket having risen to £2, playing the lottery may appear less appealing than previously.

The odds of becoming a millionaire with a £ 2 ticket are one in 10 million. While that is far better than the one in 36 billion chance of winning a million in its monthly draw with a £1 Premium Bond, the downside is that unless you win your stake is lost. The only way to improve your odds is by buying more tickets, but risk wasting even more money. The most likely outcome is that you will lose.