Expert Q&A: Premium bonds
Q How do Premium Bonds work?
Premium Bonds are a form of savings account, but whereas a normal deposit account pays you a stated rate of interest on your savings, with Premium Bonds there’s no guaranteed interest. Instead, there’s the chance of winning a prize, which can be anything from £25 to £1 million. Each month, two £1m jackpots are won, and two million other cash prizes, with 5,000 of them worth between £500 and £10,000. All the prize money is tax-free.
Q They’ve been around for years. Are they still as popular?
They’re actually the UK’s biggest savings product, held by over 21 million people. They’ve become attractive to a lot of savers in recent years, because interest rates on deposit accounts are so low that you’re often not losing much by putting some money into Premium Bonds instead. If you average out the return holders get from Premium Bond winnings, it works out at around 1.15%, which is better than most savings accounts – but, of course, most people won’t get that average, because it includes the big wins. It’s perfectly possible to get much less, or even to hold Bonds for years and never win at all, especially as the number of prizes has recently been cut.
Q How safe is my money if I buy Premium Bonds?
About as safe as it gets.
You can cash in Premium Bonds at any time and get the full amount back, and because National Savings and Investments (NS&I), which issues them, is backed by the Government, there’s no risk of it going bust. However, over time, inflation will reduce the value of the cash invested, but that’s also true of any savings account where the interest rate is lower than the rate of inflation, and at the moment, that’s almost all of them.
Q How does the monthly draw work?
Although it’s referred to as a draw, it doesn’t actually work like one. Instead, each Bond has a unique number, and a machine randomly generates a list of numbers each month, which is matched, in order, to bond numbers. There are a lot of conspiracy theories about some numbers, especially older ones, being left out, but that’s not possible because they’re not ‘put in’ in the first place – it’s not like a raffle where your ticket could get left out of the hat. Older numbers can still win, but new Bonds do so more often because there are more of them. Similarly, people are often suspicious that so many winners seem to be in the South East of the country, but that’s because there are more Bondholders there.
Q How do you buy Premium Bonds?
You can buy them at the
Post Office, or at nsandi.com. Each Bond costs £1, but the minimum you can buy is £100 worth, unless you’re already a Bondholder, in which case you can buy £50 worth if you do it by standing order or bank transfer. The maximum you can invest is £50,000. You have to be over 16 to buy them, but parents can buy and hold them for their children, and grandparents can buy them for their grandchildren and have the parents hold them.
Q Can I win more than once?
Yes, you can. You have to hold the Bonds for one calendar month before they become eligible to win a prize but, after that, they continue to go into the ‘draw’ every month, and a Bond that’s won a prize can win again at any time.
Q I’ve got old Premium Bonds. Is it possible that they’ve won without me knowing?
NS&I write to all prize winners but, if you’ve moved since the Bonds were bought and not notified them, there could be money with your name on it. If you’ve got your Bondholder number, you can check instantly at nsandi.com – there’s no time limit, so if your number has ever come up, you can claim the money. If you’re not online, you can write to NS&I, Glasgow G58 1SB. The easiest way to keep a check on any wins is to register your email address with NS&I – then they’ll email you whenever you win. You can also give your bank details and have your winnings paid into your bank account.