Ex­pert Q&A: Pre­mium bonds

Woman's Weekly (UK) - - Come On In! - Frances Quinn is a jour­nal­ist who spe­cialises in fi­nance and con­sumer is­sues. She’ll an­swer your ques­tions on ev­ery­thing from sav­ings to shop­ping.

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.

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