Category Archives: Bonds

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• Lewis
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Do Premium Bonds Pay Off?

There are many people that have premium bonds and think that they are well worth having, but there are some people that feel that they are a waste of time. You might be considering getting some or wondering whether to cash your in or buy more and thinking about whether they are worth having or not.

How do Premium Bonds Work?

A premium bond is a special way to save money. For every pound that you pay in, you will be given one bond number. Once a month each bond is entered in a draw and if yours gets picked you will get a prize between £25 and £1,000,000. The value and amount of prizes depends on the interest rates and the amount of people with bonds. You can buy up to 50,000 bonds in increments of 25. There is no interest paid on the money, but you have a chance each month of winning a tax free prize. The bonds are available to adults and children although children’s accounts are held by an adult on their behalf. That adult can also have bonds in their own right as well. Once children turn 16 the bonds are theirs and prizes will be paid to them rather than the adult.

How Well do They Pay Out?

The equivalent interest rates for premium bonds are usually a little higher than an instant access savings account but the chances of winning a prize are not the same for each holder. Each bond has the same chance of winning, which means that those with the maximum holding of 50,000 bonds have a much higher chance of winning than those holding just one bond. Therefore, if you want to make it worthwhile then it could be worth making sure that you buy a significant amount of bonds and then you have a much better chance of winning a prize. It is all down to chance as well which means that you may find that even if you have a large holding you do not win that often, but of course, there is always a chance that you could win big.

Should I get Some?

Whether you get some is a tricky decision to make. You could probably get a higher guaranteed return with a different savings account and so it could be better to use one of those if you want to make sure that you will get something back for having the money. Logical savers may feel that this is the only logical thing to do. However, if you like a gamble then the premium bonds will probably appeal to you. In fact, if you buy lottery tickets, then they could be a fantastic replacement. There is only one draw a month but you could still win a prize and you will be able to get your money back whenever you want to. Rather than throwing money away on tickets that only get drawn once, you will be able to buy a bond which get entered in a draw over and over again and you can get back if you need the money.

It is probably much better to buy them if you can afford to buy a significant chunk. Although holders with small amounts of bonds do sometimes win, it tends to be the holders with more bonds that win more often and so this can be something that is worth considering. You will need £50,000 to have the maximum holding which is a considerable amount but it will increase your odds the more you have so you could slowly build up to a decent amount or you could wait until you have a chunk before you buy any.