From Sunday 1st June investors are now able to buy up to £40,000 of Premium Bonds – the limit was previously £30,000. There will be two £1 million prizes and other prizes of smaller amounts for £100k, £50k, £25k, £10k and £5k and some smaller prizes of between £25 to £1,000. Although there is an element of gambling, many people regard the prizes as ‘yield’ – over a long period of time you should in theory get a steady return from the money that has been invested. The yield has be dropping over a number of years in line with bank deposit rates and now sits at a less than generous 1.3% (last year it was 1.5%). With inflation running near to 2% you don’t want to be putting all your money into Premium Bonds although it is always nice to have the possibility of winning a large cash prize!
Other things worth knowing about Premium Bonds:
- Prizes are tax free which makes them more attractive for higher tax payers
- The scheme is government backed making it a very safe investment.
- Your money can be held for up to a month before they are eligible for the draw
- There are 600,000 people who currently hold the maximum amount (currently £30k)
- You can buy premium bonds by phone, online or at a Post Office branch
- Over £45 million is invested in Premium Bonds and there is around £46 million of unclaimed prizes