£25 premium bond is a winner
The minimum investment for popular premium bonds has been slashed for the first time in more than 50 years, down from £100 to £25.
The move by National Savings and Investments (NS&I) is designed to encourage people to save regularly, a habit that has fallen by the wayside generally.
Premium bonds are one of the most popular savings products. More than 25 million people have a huge £79 billion stake in them.
Anyone aged 16 or above can buy the bonds. Parents and grandparents can buy them for children and grandchildren under 16.
Their attraction is the chance to win taxfree prizes of between £25 and £1million every month. NS&I paid out 3,223,731 prizes worth just over £92 million in January.
The minimum investment jumped from £10 (about £20 in today’s money) to £100 (just under £200) in 1993 and has stuck there ever since — until now.
every £1 bond has a 24,500 to 1 chance of winning a monthly prize. If you don’t win, you keep your stake and the bonds go into the next draw. The amount of prize money depends on how much is sitting in the bonds. NS&I pays out a total of 1.4 pc of this sum — currently £79 billion — each year.
The rate can change, but it has been stuck since December 2017, although general interest rates have risen by 0.25 per cent since then. NS&I says the rate compares well with other easy-access savings accounts.
NS&I chief executive Ian Ackerley says: ‘Lowering the minimum investment on premium bonds is part of how we can support a stronger savings culture across the country and help those who want to be able to save little and often.’
You can now set up a standing order of £25 a month to save on a regular basis.
The drop to £25 has been brought in because the savings ratio — the amount we put aside out of our disposable income each month — has hit its lowest level since records began 54 years ago. Office for National Statistics figures show it was down to 3.9 pc in 2017, compared with 9.4 pc two years earlier.
The cut in the minimum investment is the first since premium bonds were introduced 63 years ago. In 1956 the minimum was £1, rising to £2, then £5, before hitting £10 in 1985.
The fall will be welcomed by parents and grandparents who want to give the bonds to their children and grandchildren but who, at £100 a shot, have been priced out.
If you buy for your grandchildren, you need to nominate a parent or guardian to manage the bonds. You can’t keep control of the money yourself. NS&I also plans to let uncles, aunts, godparents, family friends and other adults buy premium bonds for children though a date hasn’t yet been announced.
The maximum investment remains at £50,000. All money with NS&I is 100 pc secure as it is backed by the Government.