Premium Bonds – Advantages & Disadvantages

by , under Business, Other

Returned in might also closing yr i invested £1000 in top rate bonds. To this point, i have gained nothing and also have my £1000 worth of bonds. My plan became to maintain them for three hundred and sixty five days before re-assessing whether or not i have to keep them or now not. This newsletter will talk the benefits and drawbacks of top class bonds as an investment car and finish with my decision.

How they work

Essentially, the month-to-month interest earned on each premimum bond is lumped collectively to make the prize fund. Then, a Prize Bond takes region the use of a computer (ernie), which randomly picks the winners.

The info

To be eligible to buy top rate bonds, you ought to be at least 16 years old and must make investments at the least £a hundred (or £50 thru a ordinary standing order). Top rate bonds may be sold as a gift for a child beneath 16 by using their dad and mom and grandparents. The most that may be invested in top class bonds is £30,000.

Top rate bonds are furnished through country wide financial savings & investments, which might be subsidized by means of hm treasury so your capital is extremely safe.

The numbers

In step with the national savings & investments internet site, there are presently £26 billion worth of bonds issued. The interest rate used in the calculation of the prize fund is three.60% (from february 2007), there are 1,417,836 prizes every month and the entire prize fund values £102.1 million.

Prizes are tax-free and range between £50 and £1,000,000.

Hazard of triumphing

Country wide savings & investments state that the chance of winning (any) prize is one in 24’000 in line with bond. Using the other figures on their website (1’417’836 prizes and 26 billion bonds), i calculate that there’s a one in 18’338 risk of triumphing something per bond although it’s really worth noting that these figures may be obsolete. Manifestly they can not replace the figure on every occasion a bond is sold 🙂

It is also worth noting that should you win, you continue to simplest have a one in 708’918 danger of prevailing one million, making the chances of grabbing the big prize over one in 17 billion.

How does it examine to the countrywide lottery

The countrywide lottery (or lotto, as it’s far now known as) gives each price ticket a one in 14 million danger of winning the jackpot, that’s commonly at the least 1,000,000. This compares with a one in 17 billion chance with premium bonds. There’s a one in 54 threat of triumphing a prize with lotto, as compared with a one in 24 threat of triumphing a prize with top class bonds. However, with premium bonds, you preserve your capital of £1 according to bond and it is able to be utilized in multiple draws. With lotto, each £1 spent on a price ticket is lost and the smallest prizes are decrease than top class bonds (£10).

Blessings & negative aspects

To summarise, beneath are the blessings and drawbacks of making an investment in premium bonds:


Threat of prevailing a extra than you have earned in hobby
Interesting funding
Prizes are tax-loose
Capital is retained
Capital is relaxed (backed by hm treasury)

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