I’m always asked about how to buy Premium Bonds, and if they’re worth it, so I thought I would write over here about them for anyone wondering what they are and how they work. I need to start this by saying investments are subjective and a personal choice, so this is just my opinion.
People make different investment choices based on the risks they are willing to take and the kind of plans they have to make their money work, like how long they can leave it before they need it available. There are a lot of things published online about Premium Bonds that intrigue people and I know lots of my audience over on YouTube are interested in buying them or ask if they’re worth it, so hopefully this is helpful.
Premium Bonds; What to know.
Premium Bonds are investments that don’t offer you any guaranteed returns on your investments because there is no interest. If you don’t win a prize you don’t earn anything. So, if you keep your money in Premium Bonds for a long period you may lose the true value of your money because of inflation.
The low odds of winning the big jackpot is a reality that you need to keep in mind. It’s also not a great idea if you are looking for a regular income like you would with dividends.
If you are saving for something big that you need access to (like a house deposit) it could be a really good solution for where to store the money as you could just win a prize! (but no interest so personally I wouldn’t have this as a long term savings strategy.)
Finally, there is an initial delay which means that the bonds you purchase are entered into the first prize draw after being held for a full prize cycle. So, if you buy a Premium Bond in January, the bond will only be included in the March prize draw.
So, what exactly are Premium Bonds?
You might be wondering how to buy Premium Bonds, but let’s first chat about what they are. They’re the UK’s biggest savings product with more than 21 million people saving over £107 billion in them.
In simple terms, Premium Bonds are like lotteries. So, you buy tickets to these lotteries and then it goes through the system and a random number generator machine – but you don’t lose your money like you would do on a lottery, it just stays in your account.
This is a Government-backed scheme by National Savings & Investments and therefore you can be safe in the knowledge that you don’t lose your investment money.
The minimum investment you can make in premium bonds is £25. The maximum investment you can make is £50,000.
Although the probability of winning a big prize is very low, Premium Bonds offer you a way to invest your money where your prize money is tax-free. Also, you can access and liquidate your investments anytime you like. So, you have access to your investment money whenever you need that fund, and you don’t need to worry that the market might be down like you would in the stock market.
You can choose to reinvest your winnings, should you win! Or take out the money each time. If you have the maximum holding of £50,000 then your prize will automatically be paid to your bank.
What you put in is what you take out.
How to buy Premium Bonds?
If you are interested in how to buy Premium Bonds you can access information through the NS&I official website. You can also call the NS&I numbers and buy premium bonds over the phone. If you prefer, you can buy them by the post by completing the application form and sending it with a cheque payable to NS&I.
You can also buy them via bank transfer, which is what I do.
However, and this is important to save you a heart attack, after you’ve bought the Premium Bonds it doesn’t reflect in your account immediately, it takes some time for the information to reflect in your account but it will arrive within a few days.
How to Manage Premium Bonds?
2,079,568 prizes are unclaimed, worth a total of £74,452,325!! Many people are unaware if someone has bought a Premium Bond for them in the family. However, you can make use of the app that would allow you to track and know if you have any claimed Bonds. This allows you to check your balance and transactions and even look for prizes you’ve won if any.
Are Premium Bonds Worth It?
Now that you know how to buy premium bonds, the next question would be if you should invest in Premium Bonds or not.
The best part about them is that they are completely accessible. This means that you can withdraw it whenever you want money for your personal needs or emergencies. Investing in stocks and shares doesn’t always offer you the flexibility to withdraw funds as and when you like and it’s not stable like this as other investments are much more volatile.
Another good thing about Premium Bonds is that you have a chance to win big. You can win a jackpot and that can change your life in a big way. But, the odds on this are very low.
All the prizes that you win with Premium Bonds are tax-free. So, you can ensure that you get the amount that you won and there are no tax deductions to it.
Do you hold Premium Bonds – let us know if you’ve won big!
Sujan Mondal
May 22, 2023I Love Your Blog Post. This is very Informative.
Carla Corelli
May 31, 2022Hi there – I had never actually heard about premium bonds so thanks for the explanation. However I have to admit that I do not really get it. Am I understanding correctly that it is a lottery and the ‘price’ you pay for participation is the fact that you do not earn any interest or get any growth on your capital? I find it a strange concept but clearly some people must like it. Different strokes, as they say 🙂