What are Premium Bonds and how do they work?
PREMIUM Bonds are a unique and popular way to save some cash - but how do they work?
Premium Bonds are a type of savings account backed by the Government.
But instead of getting a fixed rate of interest like you would from a high street bank, your money is entered into a prize draw each month.
It has now been announced that the prize fund rate for Premium Bonds increased to 3.3% in March.
This means customers with savings in NS&I's variable rate accounts have seen a boost in their savings in the last month.
The rate has risen five times within the last year.
You can put money in and take it out whenever you want.
You need to put in a minimum of £25 to get started and you can invest up to £50,000.
Each £1 you put in Premium Bonds is an entry in to the monthly prize draw.
You'll need to know the numbers of your Premium Bonds which can be found on your Bond record or through your online account.
If you've lost track of your numbers you can ask NS&I for them.
For this you will need to use your NS&I number rather than each Premium Bond number. It's 11 digits long and will be on any communication you've had with NS&I.
You don't always need to check your numbers as you can get prizes under £5,000 paid straight into your bank account, or automatically buying more Premium Bonds.
For higher value prizes worth more than £5,000 NS&I will contact you by post and if you sco0p the £1million jackpot, someone will pay you a visit to let you know!
NS&I says that there are over 1.5million premium bond prizes yet to be claimed by their rightful owners.
This amounts to over £60million waiting to be paid out to the rightful winners.
What are the Premium Bond prizes?
The draw is held each month and the winning number is pocked by a computer called ERNIE (which stands for electronic random indicator equipment).
There are three kinds of prizes as follows:
- Higher value prizes of £5,000, £10,000, £25,000, £50,000, £100,000 and £1million
- Medium value prizes of £500 and £1,000
- Lower value prizes of £25, £50 and £100
When are Premium Bonds drawn?
Premium Bond draws are held at the beginning of each month, with the winning number selected by a computer called ERNIE (electronic random indicator equipment).
Each £1 you put in Premium Bonds is an entry into the monthly prize draw.
How likely am I to be a winner?
The chance of winning a prize, with an individual bond, is 34,500 to one.
Each bond has an equal chance of winning and the more you buy, the more your chances improve.
NS&I says its annual prize fund interest rate is 1% which it calculates by working out the mean rates of return per bond purchased.
But research from MoneySavingExpert found that most people earn is significantly less than this headline rate, with plenty of savers earning nothing at all.
Most Premium Bond savers will find that their investments fail to keep pace with inflation, but it's hard to find savings accounts that beat inflation too.
You can check your odds depending on how many bonds you have and how long you'll keep them using this .
You need to be over 16 to buy them.
Parents, grandparents and legal guardians can buy Premium Bonds on behalf of children under 16.
Make sure you keep any paperwork safe, so you can still track your bonds easily if you relocate.
Premium Bonds cannot be passed on if you die, but your heirs can get the cash value of the bonds, as long as they are sold by the executor within 12 months.
NS&I has slashed the rates on its savings accounts.
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