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Premium Bonds are a two-in-one saving method and lottery scheme available for anyone who lives in the UK. It’s estimated 21 million people up and down the country have premium bonds, with an approximately £91 billion pounds in accounts right now.
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Premium Bonds, issued by the NS&I, allow you to take out a minimum investment of £25 all the way up to £50,000.
You do not earn interest or get income through dividends with a Premium Bond investment - but you are automatically drawn into a monthly prize draw.
You could win an extra £25, or go all the way up to a £1 million jackpot
Premium Bonds are a tax free investment, which means prizes are exempt from UK Income Tax and Capital Gains Tax.
Premium Bonds: Premium Bonds are a great way to save for future generations (Image: GETTY)
Premium Bonds: You do not earn interest or get income through dividends with a Premium Bond investment (Image: GETTY)
How to Premium Bonds work?
You’ll need to invest at least £25
You can keep buying bonds until you reach the maximum holding level of £50,000.
You get a unique bond number for every £1 invested. So if you save £100, you get 100 bond numbers (each with a chance to win a prize)
Once held for a full month bonds are included in a monthly draw - meaning you are now eligible to win a cash prize
You have to be aged at least 16 to purchase Premium Bonds for yourself
Premium Bonds: You yourself need to be at least 16-years-old to buy them for yourself or someone else (Image: GETTY)
Can you buy Premium Bonds for someone else?
Yes you can - although there are some rules.
You yourself need to be at least 16-years-old to buy them for yourself or someone else.
If you have a child younger than 16, you can buy Premium Bonds online, by phone or by post, or by switching money from another NS&I account in the child’s name.
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Now, it’s possible for any adults buy Premium Bonds for someone else’s child under 16 - however not everyone can do so by phone.
Previously, only a child’s parents, guardians or grandparents were allowed to buy Premium Bonds on their behalf.
The NS&I Premium Bonds brochure also states that a person who is at least 16-years-old can buy Premium Bonds for another adult if they are acting as their power of attorney.
It’s not possible to hold Premium Bonds jointly or in trust.
Premium Bonds: Previously, only a child’s parents, guardians or grandparents were allowed to buy Premium Bonds on their behalf (Image: GETTY)
While Premium Bonds are a very popular way to save money on behalf of a child or grandchild, but they are not for everyone.
All of the money you put in is secure as it is held by the Government - and you can cash out bonds anytime you like.
There is the chance that by winning the draw you could earn a very high tax-free return - but other than this, your money does not go much further as you do not earn interest on the savings.
Unless you win one of the bigger prizes, your return is unlikely to beat inflation.
Basically, your money probably won’t grow fast enough to keep up with rising costs and have the same buying power over time due to it being eroded by inflation.
