Premium Bonds are operated by the UK state-owned National Savings and Investments (NS&I). They are back by HM treasury meaning that all capital invested is guaranteed and investors will never lose their money.
Premium Bonds are very popular amongst adults of all ages in the UK. Buying Premium Bonds is similar to depositing money in a bank except that no interest is paid on the investment. Instead, interest that would usually be paid is divided into prize funds. Bond numbers are then selected at random by a computer in a monthly prize draw to determine who wins these prizes. Prizes awarded range from £25 up to the top monthly prize of £1 million.
How to Buy Premium Bonds
Premium bonds are easy to buy for anyone aged over 16. Bonds can be bought on behalf of a child, but are the responsibility of the parent or guardian making the purchase until the child reaches the required age to take control of their bonds.
Premium bonds are worth £1 each; a minimum investment of £100 is required each time. It is possible to buy more than £100 worth in each transaction, but the total invested must be in whole pounds. A standing order can be arranged whereby Bonds are bought automatically on a regular basis and the minimum investment for standing orders is £50. The maximum amount of Bonds that any one person can hold is £30,000.
There are three main ways to purchase Premium Bonds: the first is in person at a Post Office branch. Inform the cashier that you wish to purchase Premium Bonds and you will be asked to complete a purchasing form and make payment. The second way is over the telephone by speaking to NS&I direct or through their secure online payment system where Bonds can be bought using a bank card.
Winning Prizes
The prizes awarded depend on the interest rates within the UK. Since October 2009, the annual prize fund interest rate has been 1.50%. This figure can increase or decrease depending on the interest rates as set by the Bank of England.
Since October 2009, the overall odds of winning a prize has been 24,000 to 1, but again this can change.
Prizes are usually sent to the investor’s home address in the form of a cheque. It is possible, however, to have prizes paid directly into a bank account or have the prize reinvested in the form of more Premium Bonds. Since January 2010, investors can manage their Premium Bond accounts by registering for the online service. The Online service allows investors to check whether they have been lucky in winning a prize, invest in more premium bonds or cash their bonds in and receive payment.
‘Cashing in’ can also be completed by filling out a form at any Post Office branch.
David Myerscough - David, a Business Studies graduate from the UK began his professional writing career in early 2010. Currently, David writes for online ...
